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FIFTY  YEARS 

OF  A  CIVILIZING 
FORCE 


flARRY  CHASE  BREARLEY 


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FIFTY  YEARS  OF  A  CIVILIZING  FORCE 


Courtesy  of  J.  Ed^ar  LiM 


TilE  SETTING  OF  THE  STORY 


Historic  Lnder\vr;tcrs"  Hall"  (156  Broadway  as  it  appeared  in  hilv,  1866.  when 
the  story  1  egan  w  itnin  its  walls.  In  this  building,  the  National  Board  maintained 
Its  offices  for  thirty-one  years  (1871-1902),  and  passed  through  some  critical  periods 
of   its   h.storv. 


FIFTY   YEARS 

OF  A  CIVILIZING   FORCE 


AN  HISTORICAL  AND  A  CRITICAL  STUDY  OF 

THE  WORK  OF  THE  NATIONAL  BOARD 

OF  FIRE  UNDERWRITERS 


BY 

HARRY  CHASE  BREARLEY 

WITH    AN    INTRODUCTION    BY 

WILBUR  E.  MALLALIEU 

GENERAL   MANAGER   OF   THE    NATIONAL    BOARD   OF    FIRE    UNDERWRITERS 


AND    HISTORICAL    APPENDICES    COMPILED   BY 

DANIEL  N,  HANDY 

LIBRARIAN    OF   THE    INSURANCE    LIBRARY    OF    BOSTON 


WITB  TWENTY  EIGHT  PORTRAITS  AND  FORTY  ONE 
ILLUSTRATIONS  FROM  PHOTOGRAPHS 


NEW  YORK 
FREDERICK  A.  STOKES  COMPANY 

MCMXVI 


Copyright,  1916,  by 
Frederick  A.  Stokes  Company 


All  rights  reserved 


PREFACE 

The  United  States  might  well  have  been  named 
Terra  del  Fuego — "Land  of  Fire."  It  has  an  aver- 
age of  1500  fires  per  day,  or  more  than  one  a  minute, 
a  daily  loss  of  $600,000.  A  value  equal  to  one- 
quarter  the  total  for  all  the  new  buildings  erected 
each  year  is  thus  destroyed,  and  in  1906  this  propor- 
tion rose  to  one-half.  Every  fire  subtracts  a  definite 
sum  from  the  national  wealth  through  irretrievable 
loss.  This  country  is  proud  of  its  petroleum,  gold, 
silver,  and  copper  production,  but  its  fire-tax — the 
direct  cost  of  its  fires  and  the  incidental  expenditures 
resulting  therefrom — consumes  as  much  wealth  as 
these  four  industries  together  create.  Fire  is  one  of 
the  great  outstanding  economic  factors  of  American 
civilization,  and,  in  consequence,  fire  insurance  has 
become  one  of  our  most  familiar  institutions. 

The  American  public  has,  in  a  general  way,  some 
acquaintance  with  these  facts  and  has  grown  to  look 
upon  fire  insurance  as  a  natural  precaution,  but  there 
has  been  slight  appreciation  of  the  magnitude  of 
loss-statistics  or  of  the  vast  proportions  of  American 
fire  underwriting,  with  its  thirty  million  policies 
and  its  sixty  billion  dollars  of  insurance  in  force. 
The  story  of  the  latter  undoubtedly  ranks  in  impor- 
tance with  that  of  American  railroad  or  banking  evo- 

[    V    ] 


PREFACE 

lution,  yet  it  is  scarcely  known  outside  of  professional 
circles.  It  contains  some  features  of  peculiar  signifi- 
cance, features  which  cast  an  altogether  new  light 
upon  our  national  development  and  which  the 
student  of  American  economics  cannot  afford  to 
overlook.  It  is  essentially  a  story  of  the  past  half- 
century,  and  is  best  understood  by  examining  the 
history  of  a  great  trade  organization  which  has  domi- 
nated the  field  of  American  fire  insurance  since  the 
Civil  War — the  National  Board  of  Fire  Under- 
writers. 

The  history  of  the  National  Board  reflects,  in 
many  respects,  the  civic  development  of  the  United 
States  of  the  past  fifty  years.  This  is  the  logical  re- 
sult of  the  peculiarly  national  character  of  fire  insur- 
ance, which  is  operative  in  every  city,  town,  village, 
and  country  district.  It  concerns  the  individual,  as 
an  individual,  in  the  most  intimate  phase  of  his  life 
— that  relating  to  his  home  and  its  contents;  it  also 
concerns  his  business  interests,  whether  he  be  em- 
ployer or  employee.  It  concerns  commerce,  indus- 
try, and  finance  in  their  largest  aspects.  In  all  of 
these,  it  is  a  conservative  influence,  furnishing  a  basis 
for  material  progress. 

From  another  view-point,  fire  insurance  Is  a  reflec- 
tion of  American  psychology.  Its  extraordinary 
proportions  are  an  outgrowth  of  the  immense  fire- 
waste,  which,  in  turn,  is  largely  traceable  to  charac- 
teristic American  carelessness;  thus  it  marks  the  hur- 
ried, optimistic  spirit  that  erects  temporary  buildings 

[vi] 


PREFACE 


of  flimsy  materials  in  confident  expectation  that 
growth  will  soon  require  their  replacement.  It  is 
affected  by  the  reckless  waste  of  resources  character- 
istic of  a  new  civilization,  and  its  high  premium- 
rates,  compared  with  those  of  Europe,  are  a  measure 
of  the  expensiveness  of  such  waste.  Its  conflagration- 
statistics  are  a  significant  and  sinister  comment  upon 
the  easy  national  tolerance  which  has  permitted  one 
individual  to  be  a  menace  to  the  many,  and  which  has 
not  exacted  efiicient  municipal  government.  In  more 
recent  years,  fire  insurance  has  acted  as  a  psychologi- 
cal barometer  of  the  changes  in  the  American  civic 
consciousness  in  all  these  respects  and  has  even  indi- 
cated the  exact  degree  of  the  progress  that  is  being 
made  by  different  sections  of  the  country.  Thus,  its 
premium-rates  record  the  development  of  our  com- 
munities from  aggregations  into  organizations. 

Again,  the  National  Board  history  has  exemplified 
American  business  evolution.  It  has  shown  various 
local  organizations,  arising  in  response  to  local  needs, 
extending  their  sphere  of  operation  through  a  natural 
process  of  growth,  engaging  in  fierce  competition 
with  destructive  results,  and,  finally,  being  nearly 
overwhelmed  by  the  chaotic  conditions  resulting  from 
the  Civil  War — an  early  story  of  disharmony  and 
inefficiency  with  the  public  paying  the  bill.  Follow- 
ing this,  it  showed  the  birth  of  a  tendency  toward  or- 
ganization, of  an  attempt  to  bring  order  out  of  chaos. 
Its  early  years  presented  an  alternation  of  the  centrip- 
etal force  of  common  interest  and  the  centrifugal 

[vii] 


PREFACE 

force  of  personal  advantage  operating  to  strengthen 
or  weaken  the  central  body.  By  nearly  a  generation 
it  anticipated  the  appearance  of  monopolistic  condi- 
tions later  seen  in  many  industries,  and  foreshadowed 
their  disintegration  through  natural  causes  working 
from  within.  It  is  the  story  of  a  powerful  body 
crumbling  quickly  from  the  position  of  artificial 
strength  to  one  that  nearly  brought  extinction,  and 
then  rebuilding  itself  upon  a  broader  foundation  of 
public  interest. 

This  National  Board  history  is  particularly  signif- 
icant and  valuable  as  showing  how  self-interest  must 
tend  toward  public  service  when  recognized  in  its 
larger  values.  It  presents  a  striking  example  of  al- 
truism freed  from  sentiment  and  operating  as  a  prac- 
tical business  factor. 

Further,  it  illustrates  the  growth  of  the  desire  for 
efficiency  and  of  the  substitution  of  exact  methods  for 
the  old-time  "rule  of  thumb."  It  emphasizes  the 
necessity  for  business  combination  when  freed  from 
monopolistic  purpose.  It  has  also  showed  the  trend 
away  from  a  struggle  for  exorbitant  profits  and 
toward  a  basis  of  reasonable  equivalents.  In  all  of 
these  respects  it  proves  the  existence  of  beneficent 
forces  working  through  the  entire  field  of  American 
business  life. 

The  relations  of  fire  insurance  with  the  State  form 
not  the  least  interesting  of  the  history's  features,  and 
this  part  of  the  story  throws  a  flood  of  light  upon  both 
the  weak  and  the  strong  points  of  our  governmental 

[viii] 


PREFACE 


system.  It  shows  the  way  in  which  a  highly  techni- 
cal subject  of  great  complexity  and  large  interests 
may  be  harassed  by  ill-considered  laws  passed  by 
legislators  who  are  often  hostile  and  generally  unin- 
formed. It  ofifers  irrefutable  testimony  as  to  those 
waves  of  emotional  legislation  which  occasionally 
work  havoc  with  prosperity,  and  emphasizes  the 
necessity  of  uniformity  in  the  law-making  of  the 
various  states.  On  the  other  hand,  it  is  no  less  a  wit- 
ness to  the  decline  of  legislative  corruption,  the  grow- 
ing recognition  of  corporate  rights  under  proper 
regulation,  some  realization  of  the  public  cost  of  op- 
pressive treatment,  and  the  dawn  of  a  desire  for  a 
better  understanding  between  the  public  and  corpor- 
ations. 

It  is  generally  recognized  that  the  United  States 
is  entering  upon  an  intensive  stage  of  its  business  his- 
tory. The  crude,  expansive  forces  of  its  first  few 
generations  have  so  far  spent  themselves  that  national 
thought  and  genius  is  becoming  concentrated  upon 
organization,  conservation,  improvement  of  method, 
and,  in  particular,  the  readjustment  of  social  rela- 
tions. At  a  time  when  many  minds  are  staggered  at 
the  magnitude  of  these  new  problems,  there  is  an  al- 
most prophetic  value  in  the  study  of  a  business  which 
has  anticipated  by  nearly  a  generation  some  of  the 
most  vital  questions  of  the  day. 

The  writer  desires  to  make  grateful  acknowledg- 
ment of  his  indebtedness  to  officials  of  the  National 
Board,  to  certain  of  the  insurance  commissioners  and 

[ix] 


PREFACE 

fire  marshals,  to  city  officials,  to  those  in  charge  of  the 
Underwriters'  Laboratories,  the  National  Fire  Pro- 
tection Association,  and  the  Boston  Insurance  Li- 
brary, to  prominent  underwriters  in  New  York,  Chi- 
cago, Philadelphia,  Boston,  and  Hartford,  and  to 
others  who  have  aided  him  with  information.  If  he 
does  not  mention  them  more  specifically,  it  is  because 
their  number  makes  it  impracticable  to  do  so. 


[x] 


CONTENTS 

PAGE 

Preface  v 

Introduction xv 

CHAPTER 

I  The  Beginning  of  the  Story 3 

II  Bringing  Order  out  of  Chaos 14 

III  The  Stimulus  of  Adversity 27 

IV  The  Dangers  of  Prosperity 36 

V  "Removing  the  Bone  of  Contention".      .      .  51 

VI  Ebb  Tide  and  Low  Water 60 

VII  The  Return  of  the  Tide 70 

VIII  The  Growth  of  Fire  Prevention     ....     78 

IX  The  National  Board  as  a  Balance  Wheel      ,     84 

X  An  Enlargement  of  Engineering  Activities  .     87 

XI  Baltimore  and  San  Francisco 95 

XII  Grappling  with  the  Fire-waste  Problem  .      .    104 

XIII  An  Era  of  Legislative  Investigation     .      .      .115 

XIV  Present  Phases  of  the  Work 133 

XV  Fire  Prevention  To-day 162 

XVI    A  Visit  to  the  Underwriters'  Laboratories     .   178 
XVII     Fire  Insurance  in  its  Relation  to  the  Policy- 
holder         197 

XVIII     Fire  Insurance  in  its  Relation  to  Business    .  206 

XIX     Fire  Insurance  in  its  Relation  to  the  State     212 

XX    The  National  Board  as  a  Civilizing  Force     .   226 

Appendices 233 

Index        313 


ILLUSTRATIONS 

The  Setting  of  the  Story Frontispiece 


FACING 

PAGE 


The  Beginning  of  the  Story 4 

The  Historic  "Chicago  Compact" 5 

The  Old  Quarters  at  156  Broadway 22 

Mark  Howard — James  M.  McLean — E.  W.  Crowell — 
George  T.  Hope 23 

Henry    A.    Oakley — George    L,    Chase — Alfred    G. 
Baker — M.  Bennett,  Jr 52 

Daniel  A.  Heald — D.  W.  C.  Skilton — E.  A.  Walton — 
William  B.  Clark 53 

Henry  W.  Eaton — E.  C.  Irvin — George  P.  Sheldon — 
Robert  B.  Beath 92 

Henry   H.   Hall — John   H.  Washburn — George   W. 
Burchell — J.  Montgomery  Hare 93 

Alonzo  W.   Damon — George  W.   Babb — ^William   N. 
Kremer — Ellis  G.  Richards n6 

Charles    B.    Whiting — ^Thomas    H.    Montgomery — 
Henry  K.  Miller — ^Wilbur  E.  Mallalieu      .     .     .117 

The  Executive  Committee  in  Session 136 

A  Conference  in  the  General  Manager's  Office  .     .   137 

Field  Work  of  the  Fire  Prevention  Committee 

Fire  Engine,  Water  Tower  and  Fire  Boat  Tests  .      .      .144 

Measuring  Diameter  of  Fire  Boat  Nozzle ;  Measuring  Hy- 
drant Discharge;  Gaging  Stream  from  Three  Hose 
Lines 145 


ILLUSTRATIONS 


FACING 
PAGE 


The  Main  Room  of  the  Actuarial  Bureau  ....  154 

The  Tabulator  Room  of  the  Actuarial  Bureau   .     .  155 

Card  Perforating  Room  of  the  Actuarial  Bureau      .  155 

About  to  Start  for  a  Great  Conflagration     .     .     .158 

The  General  Office  and  Some  of  the  Members  of 

the  General  Manager's  Staff 159 

A  Corner  of  the  Quarters  of  the  Committee  on  Fire 

Prevention 159 

Practical  Lessons  in  Construction 166 

How  Carelessness  Causes  Fires 167 

"The    Rather    Academic-looking    Building    in    East 

Ohio  Street" 178 

The  Office  of  the  President 179 

Hose  Test 179 

Studying  Fire  Hazard 186 

Adjusting  the  Switch  and  Socket  Testing  Machine  186 

Rubber  Strength  and  Stretch  Test 187 

Vapor  Explosion  Test 187 

Fire  Test  of  Roof  Coverings 188 

Panel-Testing  Furnace 189 

Testing  with  a  Hose  Stream 189 

The  Hydraulic  Laboratory 190 

The  Original  "Arson  Reward  Fund"  Subscription     .  191 


INTRODUCTION 

A  CONNECTION  of  fifteen  years  with  an  organiza- 
tion of  the  character  of  the  National  Board  of  Fire 
Underwriters  has  offered  unusual  opportunities  to  ob- 
serve corporations  and  men  who  manage  and  direct 
their  affairs.  It  has  also  encouraged  a  study  of  the 
history  of  the  organization,  and  a  desire  to  seek  an  in- 
timate knowledge  of  the  earlier  days  and  a  book  ac- 
quaintance, at  least,  with  men  who  gave  their  time  and 
energy  to  place  one  of  the  now  great  institutions  of 
the  country  on  the  plane  of  a  profession.  Every  big 
corporation  has  one  big  man,  and  an  association  of 
big  corporations  has  many  big  men.  The  acts  and 
motives  of  one  man  or  a  small  group  of  men  are  some- 
times viewed  with  suspicion  if  their  business  is  with 
the  public,  but  in  this  instance  a  body  of  big  men, 
forming  an  association,  holds  frequent  committee 
meetings  to  advance  the  objects  and  purposes  of  a 
business  organization,  and,  in  thus  helping  them- 
selves, these  men  also  help  their  competitors  and  serve 
the  public  quietly  and  efficiently.  They  do  this  in 
order  to  promote  the  principles  of  sound  underwrit- 
ing and  to  lessen  the  loss  of  life  and  property  by  fire. 
Such  is  the  National  Board  of  Fire  Underwriters. 

The  author  of  this  volume  was  accorded  free  access 
to  all  files  and  records,  and  it  is  believed  that  many 

[xv] 


INTRODUCTION 


facts  unknown  to  the  present  generation  are  herein 
made  public  for  the  first  time.  There  is  no  other 
association  of  its  kind  or  character.  There  has  been 
no  disposition  to  overlook  the  mistakes  of  earlier 
days  when  underwriters  were  learning  by  hard  ex- 
perience some  of  the  business  principles  which  to- 
day are  universally  recognized. 

The  general  public  will  doubtless  be  astonished  to 
learn  that  the  fire  insurance  business,  through  the 
National  Board  of  Fire  Underwriters  and  its  asso- 
ciated organizations,  is  rendering  such  important 
lines  of  public  service  at  private  expense.  The  pres- 
ent status  of  the  Board  as  a  service  organization  can 
be  best  understood  in  the  light  of  an  historical  record, 
where  the  reasons  for  the  abandonment  of  legislative 
functions  are  clearly  set  forth.  It  is  as  truly  a  na- 
tional organization  as  its  name  would  indicate,  and 
numbers  on  its  executive  and  other  committees,  un- 
derwriters from  the  Pacific  Coast,  the  Middle  West, 
the  South  and  the  East,  all  working  together  with  a 
harmony  unknown  a  few  decades  ago.  Its  member- 
ship gives  unselfishly  of  time  and  talent  to  advance 
the  best  interests  of  the  association,  and  thereby  better 
to  serve  the  insuring  public,  the  municipality  and  the 
state.  It  is  the  sentiment  of  underwriters  generally 
that  the  relation  of  the  companies  to  municipal  or 
state  government  and  the  public  should  be  predicated 
upon  mutual  understanding  and  a  spirit  of  perfect 
fairness,  and  it  is  a  pleasure  to  note  the  author's  recog- 
nition of  the  fact  that  the  interests  of  the  underwriters 

[xvi] 


J 


INTRODUCTION 


and  of  the  public  are  absolutely  harmonious  when  so 
understood. 

In  approving  and  endorsing  the  statements  made  in 
the  following  pages,  the  volume  is  recommended  to 
the  reading  public  in  the  hope  that  it  will  lead  to  a 
better  understanding  of  the  purposes  and  objects  of 
a  business  association  which  has  existed  for  half  a 
century  and  which  to-day  is  recognized  as  an  active 
force  for  the  development  and  advancement  of  the 
Nation's  welfare. 

Wilbur  E.  Mallalieu, 

General  Manager, 
National  Board  of  Fire  Underwriters. 


[xvii] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 


FIFTY  YEARS 
OF  A  CIVILIZING  FORCE 


THE  BEGINNING  OF  THE  STORY 
(1866  and  before) 

THE  beginning  was  of  a  very  casual  nature. 
When  J.  Milton  Smith  rose  in  a  meeting  of 
the  New  York  Board  of  Fire  Insurance  Com- 
panies and  made  a  motion  upon  a  perennial  subject, 
he  probably  was  unaware  that  he  was  making  history. 
The  motion  itself,  the  starting-point  of  one  of  the 
really  big,  really  significant  stories  of  American 
civilization,  is  tucked  away  near  the  end  of  the  min- 
utes of  the  meeting,  where  the  secretary,  in  that  pre- 
typewriter  day,  had  recorded  in  ink,  now  faded : 

On  motion  of  Mr.  J.  M.  Smith,  a  special  committee  of 
three,  representing  companies  doing  an  agency  business, 
was  appointed,  to  confer  with  companies  of  other  cities 
with  reference  to  instructions  to  agents  on  the  subject  of 
uniform  rates  and  commissions. 

The  president  appointed  Messrs.  Heald,  Hope  and 
Crowell. 

This  was  on  April  30,  1866.  From  the  earliest 
days    conversation    among   fire-insurance    men   had 

[3  ] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

turned  to  rates  and  commissions  as  inevitably  as  the 
talk  of  farmers  turns  to  crops.  Conditions  had  long 
been  unsatisfactory.  Occasionally,  one  or  another, 
with  the  feeling  that  "something  really  should  be 
done,"  would  make  a  motion  or  offer  a  resolution  at 
some  gathering  of  the  profession;  there  would  be  a 
momentary  ripple,  and  then  conditions  would  return 
to  their  familiar  lines. 

But,  on  this  day,  something  actually  happened. 
This  was  due  probably  to  two  facts:  In  the  first 
place,  it  u-as  April  30,  1866,  and,  in  the  second,  the 
president,  after  waiting  to  give  the  matter  careful 
thought  (as  is  indicated  by  the  fact  that  the  names 
were  added  in  pencil  after  the  minutes  were  written) 
appointed  a  trio  of  remarkable  men — Daniel  A. 
Heald,  of  the  Home  Insurance  Company;  George  T. 
Hope,  of  the  Continental,  and  E.  W.  Crowell,  of  the 
Phenix. 

The  close  of  the  Civil  War  found  the  business  of 
the  country  in  a  generally  demoralized  condition. 
In  the  fire-insurance  field  there  was  little  short  of 
absolute  chaos.  There  had  been  an  alarming  in- 
crease in  American  fire-losses,  which  had  leapt  from 
$29,000,000,  in  1864  to  $43,000,000,  in  1865,  ^^^ 
promised  a  still  greater  increase  for  1866.  There 
was  an  unmistakable  menace  in  the  growth  of  the 
"moral  hazard,"  that  intangible  but  potent  factor  of 
human  character,  for  the  destructive  spirit  engen- 
dered by  four  years  of  war  was  showing  itself  in  a 
wave  of  incendiarism.     Companies  were  weakened 

[  4] 


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'^:«i£:z 


THE  HISTORIC  "CHICAGO  COMPACT" 

This    document    represents    an    earnest,    but    short-lived    effort    tc    secure    co-operation 
in  an  era  of  strife. 


THE  BEGINNING  OF  THE  STORY 

through  rate-cutting  competition,  and  harassed  by 
hostile  legislation.  Nerves  were  on  edge ;  every  one 
was  apprehensive,  and  the  zest  of  combat  disappeared 
in  a  sudden  realization  that  the  entire  fire-insurance 
business  was  in  peril.  The  time,  therefore,  was  pro- 
pitious for  action.  Moreover,  there  had  been  a  cer- 
tain precedent  established  by  the  convention  of  the 
preceding  year,  when  representatives  of  a  number  of 
companies  had  met  in  comparative  harmony  and  had 
appointed  a  committee  to  try  to  bring  about  Federal 
legislation  to  establish  the  national  status  of  fire  in- 
surance. True,  this  effort  had  been  unsuccessful  and, 
for  the  time  being,  was  dropped,  but,  at  least,  the 
possibility  of  joint  action  had  been  suggested. 

It  was  doubtless  with  this  thought  in  mind  that  the 
president  of  the  New  York  Board  made  his  com- 
mittee selections. 

Daniel  A.  Heald,  general  agent  of  the  Home  In- 
surance Company,  was  one  of  the  acknowledged  lead- 
ers of  the  profession.  Keen,  bearded,  with  a  shaven 
upper  lip,  and  a  domelike  brow,  he  was  a  familiar 
figure  in  the  insurance  cartoons  of  the  period.  Mr. 
Heald  possessed  a  legal  mind  and  had  formerly  prac- 
tised law  in  Vermont.  He  was  recognized  as  a 
formidable  opponent  in  debate.  George  T.  Hope, 
the  president  of  the  Continental  Insurance  Company 
has  been  described  as  ^'dignity  itself";  he  was  tall, 
very  erect,  with  a  heavy  mustache  and  beard,  was  an 
able  speaker  and  a  forceful  personality.  Of  E.  W. 
Crowell,  the  vice-president  of  the  Phenix  Insurance 

[  5  ] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Company,  a  contemporary  has  said:  "If  ever  a  man 
had  a  religion,  Crowell  had  his  in  fire  insurance.  I 
never  saw  a  man  so  wrapped  up  in  any  subject."  He 
was  the  chairman  of  the  committee. 

After  some  deliberation  the  committee  issued  a 
"preliminary  circular,"  announcing  that  the  "auspi- 
cious moment"  for  concerted  action  had  arrived. 
"The  experience  of  the  past  two  years,"  it  read,  "has 
demonstrated  that  there  has  been  no  profit  in  the  ag- 
gregate business  of  fire  underwriting  throughout  our 
country.  The  year  1865  was  so  prolific  of  losses, 
that  while  careless,  indifferent  or  reckless  underwrit- 
ing carried  with  it  disaster  and  ruin,  the  most  cautious 
and  conservative  underwriters  were  barely  able  to 
stem  the  current  and  keep  the  capital  of  the  com- 
panies they  represented  intact  and  unimpaired." 
After  suggesting  that  the  various  companies  of  the 
country  should  get  together  in  order  that  "from  the 
nettle  danger  we  may  pluck  the  flower  safely,"  the 
circular  asked  reply  to  two  questions: 

1.  Are  you  In  favor  of  cooperating  with  other  fire 
insurance  Companies  doing  an  agency  business,  in  the 
adoption  of  such  measures  as  will  be  of  common  benefit, 
and  general  interest  to  the  underwriting  Interests  of  the 
country? 

2.  Will  you  send  a  representative  from  your  company 
at  such  a  time  and  place  as  may  hereafter  be  designated, 
to  meet  with  a  delegation  of  the  New  York  Board  of 
Fire  Underwriters  In  convention,  for  a  business  confer- 

[  6] 


THE  BEGINNING  OF  THE  STORY 

ence,  and  the  arrangement  of  plans  tending  to  carry  out 
the  purposes  hereinbefore  referred  to? 

Would  they?  Indeed  they  would!  Hatchets 
were  promptly  buried;  knives  were  sheathed,  and 
affirmative  responses  fairly  poured  in  upon  the  com- 
mittee. Incidentally,  the  $10,000,000  Portland  con- 
flagration occurred  dramatically  at  that  very  moment 
and  stimulated  the  eagerness.  Many  felt  it  to  be 
almost  a  matter  of  life  or  death  that  they  should  ^'do 
something"  without  delay. 

Upon  July  7th,  the  committee  accordingly  issued 
a  "call"  for  a  convention  to  be  held  eleven  days  later 
at  the  rooms  of  the  New  York  Board.  This  conven- 
tion was  so  clearly  epochal  in  fire-insurance  afifairs 
that  in  order  to  understand  its  importance  it  will  be 
well  to  glance  briefly  at  the  early  history  of  under- 
writing. 

Although  there  were  various  ancient  and  medieval 
prototypes,  the  origin  of  fire  insurance  as  a  business 
may  be  traced  to  the  Great  Fire  of  London;  it  thus 
began  in  1667  and  was  a  response  to  the  needs  of  the 
London  sufferers.  Nicholas  Barbon  was  the  original 
underwriter,  although  the  term  itself  came  later. 
Barbon  confined  his  operations  to  insuring  buildings ; 
goods  insurance  was  not  offered  until  1706,  when  it 
was  introduced  by  Charles  Povey.  In  the  mean  time 
the  first  joint-stock  insurance  organization,  the 
Friendly  Society,  was  founded  in  1684. 

These  original  efforts  were  naturally  crude  and 

[  7  ] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

experimental,  but  the  underlying  idea  was  sound,  as 
is  proven  by  the  fact  that  the  Friendly  Society  existed 
for  nearly  a  hundred  years,  while  a  quaintly  titled 
organization,  the  Contributors  for  Insuring  Houses, 
Chambers,  or  Rooms  from  Loss  by  Fire  by  Amicable 
Contribution  continued  into  the  present  generation 
under  the  name  of  the  Hand  in  Hand.  In  1710,  two 
corporations  were  chartered,  and  the  modern  stock 
insurance  company  may  be  said  to  have  appeared. 
The  limited  scope  of  fire  insurance  in  its  early  days 
is  in  striking  contrast  to  the  vast  extent  of  its  present 
operations. 

The  strange  term,  "underwriting,"  originated  in 
London  in  famous  old  Lloyd's  Coffee  House,  early 
in  the  eighteenth  century.  This  place  was  the  rec- 
ognized rendezvous  for  shipowners  and  trading  mer- 
chants, who  made  it  a  custom  to  record  the  values  of 
cargoes  at  sea  upon  the  coffee  house  blackboard. 
Capitalists  of  the  time  speculated  upon  the  safety  of 
these  cargoes  and,  for  a  consideration,  guaranteed 
the  owners  protection  from  the  perils  of  the  deep. 
Such  men  wrote  their  names  upon  the  board  under 
the  records  of  the  cargoes  which  they  insured,  and 
"underwriting"  thus  became  synonymous  with  in- 
suring. 

Fire  underwriting  soon  reached  America.  The 
colonists  built  wooden  buildings  and  had  all  the  opti- 
mistic carelessness  of  a  new  civilization.  We  have  it 
still.  Fire,  then  as  now,  was  a  sacred  American  in- 
stitution, and  insurance  was  its  natural  consequence. 

[  8  ] 


THE  BEGINNING  OF  THE  STORY 

From  1728,  the  earliest  record,  the  growth  of  Amer- 
ican underwriting  has  been  amazing;  to-day  there 
are  few  forms  of  activity  that  can  be  compared  with 
it  in  size.  But  even  more  amazing  has  been  the 
growth  of  our  magnificent  destructiveness. 

Benjamin  Franklin,  that  great  American  innovator, 
was  a  director  in  the  first  American  company  which 
was  a  mutual  one.  It  issued  its  first  policy  in  1752. 
The  first  incorporated  stock  company  for  fire  insur- 
ance was  organized  in  1794;  the  first  reference  to  the 
agency  system  is  to  be  found  under  date  of  1798. 

It  might  be  supposed  that  the  beneficent  institution 
of  indemnification  for  fire  sufferers  would  have  been 
marked  by  a  beautiful  spirit  of  harmony  and  mutual 
helpfulness  throughout  its  history.  Unfortunately, 
the  records  show  otherwise.  The  relations  of  the 
Montagues  and  Capulets  were  kindly  as  compared 
with  the  enthusiastic  warfare  that  soon  arose  among 
the  various  companies  as  competition  spread.  Until 
1810,  few  companies  were  in  existence,  and  condi- 
tions seem  to  have  been  fairly  stable;  but  many  new 
organizations  appeared  during  the  next  twenty  years, 
and  the  supply  began  to  exceed  the  demand.  Eras 
of  rate-cutting  were  succeeded  by  spasmodic  attempts 
to  get  together;  but  bands  would  soon  snap  and  the 
strife  would  be  resumed.  This  was  not  scientific  un- 
derwriting, and  the  wreckage  was  large.  Take  the 
history  in  a  single  city  by  way  of  illustration:  In 
1 82 1,  New  York  city  had  a  rate-agreement,  but  seven- 
teen new  companies  were  formed  between  1823  and 

[  9] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

1825,  and  the  schedule  was  abandoned  under  pressure 
of  the  resulting  competition.  The  results  were  so 
disastrous  that  an  association  was  formed  in  January, 

1826,  to  make  another  effort  to  maintain  rates.  In 
1835,  the  New  York  conflagration  ruined  eighteen 
companies,  and  the  survivors  promptly  raised  pre- 
mium-rates to  a  profitable  figure,  whereupon  there 
was  another  influx  of  new  companies  and  another 
fight  for  business.  The  association  was  given  up  in 
1843,  and  again  rate-cutting  was  unrestrained.  Then 
came  the  conflagration  of  1845,  known  as  the  "Broad 
Street  fire,"  when  history  repeated  itself;  once  more 
many  companies  were  forced  to  discontinue,  once 
more  rates  were  raised  by  the  survivors,  and  once 
more  a  number  of  new  companies  were  organized  to 
profit  by  the  advanced  rates.  Under  the  stimulus  of 
the  law  of  1849,  New  York  city  produced  no  less  than 
seventy  new  companies  by  the  year  1865.  Other 
cities,  meanwhile,  were  dealing  with  similar  prob- 
lems. 

These  statements  must  not  be  considered  a  history 
of  early  American  fire  insurance,  but,  in  a  general 
way,  they  show  the  conditions  prevailing  up  to  the 
time  when  the  disasters  of  the  sixties  proved  the 
necessity  for  drastic  action. 

July  18,  1866,  marks  the  dividing  line  in  American 
fire  insurance.  Chairman  Crowell  called  the  con- 
vention to  order  and  saw  before  him  the  representa- 
tives of  seventy-five  companies.  Mark  Howard, 
president   of    the    Merchants    Insurance    Company, 

[10] 


THE  BEGINNING  OF  THE  STORY 

slight  and  spectacled,  with  gray  side-whiskers  and  a 
humorous  mouth,  was  elected  permanent  chairman 
and  took  the  gavel ;  he  was  known  as  one  of  the  con- 
servative influences  in  underwriting.  At  once  it  be- 
came evident  that  organization  and  not  discussion  was 
the  purpose  of  the  gathering.  Mr.  Heald  had  a  plan, 
which  he  explained.  It  was  referred  to  a  Committee 
of  Sixteen  for  consideration,  and  reported  back  to  the 
convention  upon  the  following  day,  when,  as  the 
record  says,  "a  verj  frank  and  general  expression  of 
opinion"  revealed  the  assembly  as  of  harmonious 
mind,  for  the  preamble  and  constitution  were  adopted 
with  little  change,  by  a  rising  vote,  amid  much  en- 
thusiasm. Thus  was  born  the  National  Board  of 
Fire  Underwriters  of  the  United  States,  to  give  it  its 
full  title.  There  can  be  little  doubt  that  to  Daniel  A. 
Heald,  the  proponent  of  the  plan  and  the  author  of 
the  constitution,  is  really  due  the  largest  measure  of 
individual  credit.  He  was  virtually  the  "father  of 
the  National  Board,"  although  many  others  played 
important  parts  in  making  it  effective. 

There  has  been  some  discussion  as  to  the  exact  rea- 
sons for  the  board's  organization,  but  an  examination 
of  the  minutes  of  this  meeting,  and  a  reading  of  the 
preamble  leave  no  question  on  the  point;  it  was  be- 
lieved to  be  a  matter  of  business  self-preservation. 
In  the  words  of  Mark  Howard:  "Without  an  or- 
ganization of  this  kind  insurance  companies  would 
be  in  the  position  of  Kilkenny  cats.  They  would  de- 
vour each  other  and  leave  nothing  but  the  tips  of  their 

[II] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

tails."  Fire-losses  had  increased  about  fifty  per  cent, 
from  1864  to  1865,  and  already,  in  the  first  half  of 
1866,  had  exceeded  the  entire  losses  of  1865.  This 
ratio  was  appalling.  The  torch  seemed  to  be  abroad 
in  the  land.  A  business  confronted  with  such  a  peril 
could  not  continue  the  rate-competition  then  existent 
and  live;  there  must  be  combination  against  the  com- 
mon enemy,  Fire.  It  was  not  unlike  the  conditions  in 
ancient  Greece,  where  Athens,  Sparta,  and  the  other 
states  enjoyed  a  succession  of  sociable  little  wars  until 
the  approach  of  some  foreign  foe  brought  them  to- 
gether as  brother  Greeks.  It  is  interesting  to  note 
that  this  idea  of  considering  Fire  as  an  enemy,  seems 
to  have  been  a  somewhat  novel  one  in  the  profession 
at  this  period.  That  insatiable  demon,  by  making 
insurance  a  commodity,  had  been  rather  kindly  re- 
garded by  the  "old-style  underwriter,"  but  at  this  mo- 
ment he  was  manifestly  carrying  things  too  far;  the 
$65,000,000  of  American  insurance  capital  was  in 
imminent  danger  of  disappearing  within  the  red 
maw;  henceforth  it  must  be  war  against  him. 

We  shall  have  later  occasion  to  trace  the  steps  of  a 
great  evolutionary  process,  through  which  a  purely 
self-interest  organization  of  practical  business  men 
found  itself  almost  unconsciously  transformed  into  a 
public-service  institution.  This  is  one  of  the  most 
interesting  stories  of  American  civil  history.  Its 
starting-point  is  in  midsummer  of  1866,  when  seven- 
ty-five companies  announced  a  common  purpose  in 
the  following  terms: 

[12] 


THE  BEGINNING  OF  THE  STORY 

1.  To  establish  and  maintain,  as  far  as  practicable,  a 
system  of  uniform  rates  of  premium. 

2.  To  establish  and  maintain  a  uniform  rate  of  com- 
pensation to  agents  and  brokers. 

3.  To  repress  Incendiarism  and  arson  by  combining  in 
suitable  measures  for  the  apprehension,  conviction,  and 
punishment  of  criminals  engaged  In  this  nefarious  busi- 
ness. 

4.  To  devise  and  give  effect  to  measures  for  the  pro- 
tection of  our  common  interests  and  the  promotion  of  our 
general  prosperity. 

To-day,  this  statement  of  purposes  has  been  most 
significantly  altered.  And  thereby  hangs  the  entire 
tale. 


[13] 


II 

BRINGING  ORDER  OUT  OF  CHAOS 
(1866-187 I) 

THE  new  organization,  the  National  Board, 
proceeded  to  get  ready  for  business  by  elect- 
ing officers  and  an  executive  committee  of 
twenty-one  members.  The  first  officers  were: 
President,  James  M.  McLean,  of  the  Citizens'  In- 
surance Company,  president  of  the  New  York  Board 
of  Fire  Underwriters;  Vice  President,  Timothy  C. 
Allyn,  of  the  Hartford  Insurance  Company;  Secre- 
tary, Frank  W.  Ballard,  secretary  of  the  New  York 
Board  of  Fire  Underwriters;  Treasurer,  J.  S.  Parish, 
of  the  Atlantic,  of  Providence.  Their  election  was 
unanimous;  Mr.  Howard,  chairman  of  the  conven- 
tion, handed  the  gavel  to  Mr.  McLean,  and  the  lat- 
ter, amid  applause,  called  the  first  meeting  of  the 
National  Board  of  Fire  Underwriters  to  order. 
Then  followed  the  usual  series  of  resolutions,  but  it 
was  recognized  that  the  really  constructive  work  was 
to  devolve  upon  the  Executive  Committee,  and  the 
convention,  its  work  accomplished,  soon  adjourned. 
The  cities  of  Hartford  and  New  York  were  rival 
claimants  for  leadership  as  insurance  centers.  The 
convention  having  met  in  New  York,  it  seemed  no 

[14] 


BRINGING  ORDER  OUT  OF  CHAOS 

more  than  fair  that  the  Executive  Committee  should 
hold  its  first  meeting  in  the  Connecticut  city.  Ac- 
cordingly, fourteen  members  there  gathered  on 
August  9th,  and  figuratively,  and  perhaps  literally 
considering  the  midsummer  season,  proceeded  to  take 
off  their  coats.  A  tremendous  task  confronted  them, 
and,  first  of  all,  Mr.  Heald  was  made  chairman. 

There  is  no  branch  of  modern  business,  with  the 
single  exception  of  railroading  (and  this  exception 
is  disputed),  that  presents  so  complex  a  study  as  does 
fire  insurance.  An  idea  of  the  immense  degree  of 
chaos  out  of  which  the  committee  now  purposed  to 
bring  order  is  simply  beyond  the  imagination  of  the 
ordinary  lay  mind.  The  first  important  task  being 
that  of  organizing  sub-committees,  those  on  Finance, 
on  Local  Boards,  Rates  and  Commissions,  on  Co- 
operation of  Companies,  on  Incendiarism  and  Arson, 
and  on  Legislation  and  Taxation  were  formed,  and 
practical  work  began  simultaneously  in  these  several 
directions. 

It  is  not  necessary  to  detail  the  successive  steps  by 
which  the  central  body  began  to  make  its  organizing 
influence  felt  in  the  broad  field  of  American  fire  in- 
surance. The  point  of  application,  the  point  where 
the  business  touches  the  public  is,  of  course,  in  the 
office  of  the  local  agent,  and  thousands  of  these  agents 
were  even  then  to  be  found  throughout  the  length  and 
breadth  of  the  land;  they  operated  in  every  town, 
village,  and  country  district,  and  came  into  direct 
relations  with  every  property  holder.     Intent  upon 

[15] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 


increasing  the  total  volume  of  their  commissions,  they 
were  not  especially  zealous  in  protecting  the  com- 
panies from  poor  risks ;  it  was  a  case  of  caveat  emptor 
so  far  as  the  latter  were  concerned.  Companies,  in 
turn,  hesitated  to  alienate  their  agents  by  refusing 
risks  which  rivals  might  accept.  The  same  rule  ap- 
plied to  rates ;  competition  over  some  large  line  would 
occasionally  become  so  fierce  that  the  insurer  could 
practically  dictate  his  own  terms,  to  which  it  w^as  cer- 
tain that  some  company  would  accede.  A  character- 
istic example  is  thus  given  in  the  words  of  an  under- 
writer of  the  period: 

Within  sight  of  my  office  Is  a  large  manufacturing 
establishment  of  the  extra-hazardous  class  with  which  I 
am  perfectly  familiar,  and  have  been  since  Its  erection. 
The  proprietor  applied  to  me  for  a  policy  upon  It;  I 
offered  to  write  one  at  2^  per  cent.,  which  was  refused. 
He  applied  to  another  agent  who  charged  him  3  per  cent., 
which  was,  of  course,  refused.  He  then  wrote  an  agency 
In  one  of  these  neighboring  towns,  and  by  return  mail 
received  a  policy  at  i  ^  per  cent.,  which  he  has  just  shown 
to  me,  saying:  "I  got  It  at  my  own  price."  .  .  .  This  Is 
not  an  Isolated  case. 

State  supervision  was  then  in  embryo,  and  *'wild- 
cat"  insurance  flourished.  Scores  of  irresponsible 
companies,  which,  as  some  one  has  said,  fulfilled  all 
of  the  functions  of  insurance  companies  except  the 
payment  of  losses,  offered  ''protection"  at  impossible 

[16] 


BRINGING  ORDER  OUT  OF  CHAOS 

figures.  When  one  of  these  concerns  would  fail,  two 
would  rise  up  to  take  its  place.  Thus,  every  element 
of  demoralization  was  present  in  the  field,  where  the 
agents  and  the  insuring  public  responded  naturally 
to  the  demoralization  of  those  ^'higher  up."  "Some 
people,"  says  David  Harum,  ''have  as  much  human 
nature  as  others — if  not  more."  These  methods  are 
an  illuminating  case  of  unrestrained  human  nature 
from  top  to  bottom.  Yet  they  throw  considerable 
light  upon  the  manner  in  which  our  happy-go-lucky, 
individualistic  American  civilization  tends,  through 
reaction,  to  correct  its  own  abuses  and  to  produce,  in 
time,  a  degree  of  efficiency.  The  abuses  had  been 
universal  and  glaring;  the  corrective  reaction  was 
now  on  the  way. 

At  the  very  beginning  of  the  Hartford  meeting, 
there  occurred  one  little  incident  which  showed  the 
potentiality  of  the  army  of  agents  in  the  background. 
Mr.  Crowell  offered  a  resolution  that,  "in  the  opinion 
of  the  committee,  it  is  deemed  expedient  to  postpone 
the  application  of  the  resolution  respecting  agents' 
commissions."  The  record  merely  says  that  this  was 
adopted,  but  it  is  not  difficult  to  read  between  the 
lines.  The  original  convention,  with  the  zeal  of  Cru- 
saders, had  proposed  the  immediate  reformation  of 
all  bad  practises,  including  the  payment  of  what  was 
believed  to  be  excessive  commissions  to  the  agents. 
It  had  been  specifically  voted  that  a  ten-percent, 
commission  should  be  the  maximum  on  all  risks 
save  dwellings  and  outbuildings,  for  which  latter  fif- 

[17] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

teen  per  cent,  should  be  the  maximum.  Obviously, 
the  agents  had  been  heard  from  in  the  intervening 
three  weeks. 

However,  this  is  merely  incidental ;  really  construc- 
tive work  began  with  vigor.  Board  membership 
must  be  increased;  classifications  and  rates  must  be 
revised;  arson  must  be  combated,  and  means  must  be 
devised  for  ending  the  warfare  that  had  made  every 
community  an  armed  camp  of  local  agents. 

Four  busy  months  ensued,  and  when  the  Executive 
Committee  met  in  New  York  in  December,  it  had  a 
record  of  accomplishment.  "To  give  an  idea  of  the 
labor  performed,"  says  the  chairman  in  his  report, 
"I  would  say  that  our  files  now  exhibit  eight  hundred 
and  sixty-four  letters  received.  Our  copy-book  of 
communications  sent  now  numbers  seven  hundred  and 
forty-two  pages,  and  our  letter-files  show  two  hun- 
dred and  thirty-six  conferences  with  New  York  com- 
panies, with  reference  to  this  business." 

Two  months  later,  February  20,  1867,  the  National 
Board  had  its  first  annual  meeting,  and  the  Executive 
Committee,  with  evident  pride,  made  its  report. 
One  hundred  and  thirty-five  underwriters  were  pres- 
ent; ninety-nine  companies  and  thirty-two  local 
boards  were  represented,  largely  by  their  presidents. 
It  was  a  body  which  might  truly  claim  to  be  repre- 
sentative of  American  fire  insurance;  and  it  now 
listened  to  the  important  announcement  that,  in  the 
remarkably  brief  time  since  the  first  meeting  of  the 
committee  ^'over  two  hundred  local  boards,  with  rates 

[18] 


BRINGING  ORDER  OUT  OF  CHAOS 

more  or  less  advanced,  and  uniform  in  character,  have 
been  organized  under  the  auspices  of  the  Executive 
Committee  of  this  board,  and  the  favorable  results 
are  apparent  to  all."  In  other  words,  the  local 
agents,  like  the  companies  above  them,  were  being 
induced  to  lay  aside  their  local  strife  and  to  cooperate 
for  the  common  good.  Throughout  the  insurance 
domain,  order  was  indeed  emerging  from  chaos. 

There  could  be  no  doubt  that  such  a  work  should 
be  put  upon  a  business  basis,  and  it  was  promptly  de- 
cided to  engage  quarters,  hire  a  secretary,  increase  the 
size  of  the  Executive  Committee,  and  push  the  cam- 
paign of  reform.  It  was  then  that  the  famous 
"Hamburg  Form"  made  its  appearance,  and  for 
many  years  it  remained  one  of  the  most  fruitful  sub- 
jects of  discussion  in  all  the  meetings.  This  form  of 
policy,  sometimes  known  as  the  "three-fourths  form," 
provided  that,  in  case  of  fire,  the  insuring  company 
should  be  compelled  to  pay  not  more  than  three- 
fourths  of  the  actual  loss  incurred.  Since  a  large 
percentage  of  fire-losses  was  believed  to  be  the  work 
of  incendiaries,  it  was  felt  desirable  to  take  measures 
to  render  the  interesting  profession  of  arson  less 
profitable.  There  was  also  an  "animated  and  ex- 
tended discussion"  over  a  new  schedule  of  tariff  and 
classification,  and  a  consideration  of  other  technical 
matters,  thus  indicating  that  the  new  board  had  al- 
ready attained  self-consciousness  as  a  legislative  body. 

Meanwhile,  the  business  public  had  awakened  to 
the  advent  of  this  great  new  force,  the  most  impor- 

[19] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

tant  combination  that  had  thus  far  appeared  in  the 
American  business  world.  This  is  reflected  in  a 
resolution  introduced  by  Mr.  Ducat,  of  Chicago, 
which  began : 

Whereas,  The  efforts  of  this  Board  have  met  with  re- 
sistance among  merchants,  manufacturers,  and  others,  on 
the  stereotyped  ground  that  it  is  a  monopoly,  and  should 
therefore  be  discouraged,  on  the  general  plea  that  all 
such  business  combinations  are  antagonistic  to  the  interests 
of  the  public; 

Therefore,  Resolved,  That  this  Board  disclaims  any 
intention  now,  or  at  any  future  time,  of  demanding  ex- 
orbitant rates,  or  of  enforcing  rules  and  regulations  in 
any  way  injurious  to  the  facilities  of  trade,  or  prejudicial 
to  the  Interests  of  the  insured. 

A  contemporary  article  in  the  Insurance  Chronicle 
supports  this  declaration.     It  says,  in  part: 

The  National  Board  of  Fire  Underwriters  ...  is  the 
offspring  of  that  prolific  mother  of  inventions,  necessity. 
It  does  not  owe  Its  existence  to  the  forethought  of  any 
one  man,  or  set  of  men;  neither  is  it,  as  some  have  sup- 
posed, the  product  of  a  desire  to  sustain  the  Interests  of 
Insurance  Companies  as  against  those  of  the  public.  It 
was  not  voluntary  on  the  part  of  the  Companies,  but  quite 
the  reverse.  ...  It  was  no  greedy  compact,  formed  In 
rapacity.  ...  It  was  not  contrived  by  Its  projectors,  but 
forced  upon  them. 

Competition  had  become  unscrupulous  and  reckless; 

[20] 


BRINGING  ORDER  OUT  OF  CHAOS 

premiums  were  computed  with  the  view  of  obtaining, 
rather  than  of  compensating  for,  the  risks;  underrating 
was  substituted  for  underwriting;  expenditures  unknown 
before  to  the  business  were  made  with  a  prodigality  and 
ostentation  which  encouraged  legislators  to  impose  taxes, 
under  the  grievous  burden  of  which  the  business  now 
groans.  .  .  . 

To  this  inflammable  train  of  circumstances,  the  bitter 
feuds  and  capricious  values  incident  to  the  war  applied 
the  scorching  heat  of  a  fearfully  enhanced  moral  hazard, 
and  spontaneous  combustion  was,  of  course  the  result. 
The  whole  edifice  of  fire  underwriting  in  America  was  in 
flames.  .  .  . 

In  this  emergency,  some  measure  of  self-protection  had 
to  be  resorted  to.  The  business  of  Fire  Insurance,  de- 
pending for  its  security  so  entirely  upon  the  law  of  aver- 
ages, and  that  law  being  deducible  only  from  the  aggre- 
gate statistics  of  many  Companies  and  many  years  of 
experience,  a  Mutual  Association  for  the  collection  of  such 
statistics  and  the  correction  of  those  evils  which  threat- 
ened universal  bankruptcy  and  ruin  seemed  manifestly 
the  best,  if  not  the  only  possible  remedy.  A  few  of  the 
border  spirits  In  control  of  the  Companies  resolved  to 
attempt  it.     Such  was  the  origin  of  the  National  Board. 

There  are  several  outstanding  features  of  the  next 
two  or  three  years  which  must  be  mentioned.  In  the 
first  place,  the  board  opened  an  office,  a  small  room 
in  the  rear  of  the  Home  Insurance  Company  at 
Broadway  and  Cedar  Street,  New  York.     There  it 

[21] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

installed  a  salaried  secretary,  Charles  B.  Whiting, 
and  a  young  assistant,  William  H.  Post,  who  was  a 
combination  of  clerk  and  messenger.  The  latter, 
now  an  old  man,  recalls  a  minor  crisis  which  occurred 
soon  after  the  establishment  of  the  office.  In  spite 
of  the  encouraging  start,  it  did  not  seem  to  be  certain 
that  the  companies  would  support  the  new  work  with 
contributions.  *'One  day,"  Mr.  Post  relates,  '*Mr. 
Heald  came  in  and  said:  'Boy,  you'd  better  make 
out  bills  up  to  the  first  of  March,  and  pay  yourself. 
I  don't  think  that  we'll  have  any  money  after  that.'  " 
However,  this  crisis  was  passed  in  safety,  and  pres- 
ently "we  moved  up-stairs  to  the  third  floor,  branched 
out  a  little  bit;  had  a  bookcase,  a  long  table,  some 
chairs,  and  a  water-cooler.  We  then  moved  to  the 
third  floor  of  156  Broadway.  There  we  stayed  until 
things  got  pretty  blue" — but  this  goes  ahead  of  the 
story. 

With  such  trifling  exceptions,  and  they  are  to  be 
found  in  the  history  of  all  businesses,  the  growth  was 
vigorous  for  the  first  three  years.  In  that  time,  there 
were  organized  four  hundred  and  seventy-five  local 
boards,  all  tributary  to  the  central  body. 

Progress  was  made  in  formulating  standards. 
Specifications  were  set  down  for  ''first  class"  woolen- 
mills,  sugar-houses,  and  the  like,  somewhat  as  beauti- 
fully penned  lines  are  given  in  copy-books  for  guid- 
ance and  comparison.  It  was  a  period  when  "the 
burning  fluid  sold  so  extensively  throughout  the 
United  States  under  the  name  of  kerosene  oil"  was 

[22] 


THE   (3LD   QUARTERS   AT    156   BROADWAY 

These  rooms  were  occupied  by  the  National  Board  for  thirty  years.  The  bearded 
man  shown  standing  in  the  upper  picture  is  William  H.  Post,  the  board's  first  clerk 
in    1866.      The   photographs  were   made   in    1894. 


AIAKK  HOWARD 


JAMES  M.  McLEAX 


Merchants'       Insurance       Company,      of         Citizen's    Insurance    Company,    of    New 
Hartford.       Chairman     of     the     original         Vorl;.      President,    1866    to    1870. 
convention,    July,     1866. 


E.  W".   CROWELL 


GEORGE  T.  HOPE 


The  Phenix  Insurance  Company,  of  Continental  Insurance  Company,  of 
Brooklyn.  One  of  the  signers  of  the  .\e\v  York.  One  of  the  signers  of  the 
call    fcr    the    ciriginal    convention.  call    for    the    original    convention. 


BRINGING  ORDER  OUT  OF  CHAOS 

Still  a  comparative  novelty,  and  a  special  committee 
reported  on  its  dangers.  There  was  also  a  notable 
report  by  a  Committee  on  Gas-Machines,  which 
seems  a  forerunner  of  the  wonderful  Underwriters' 
Laboratories  of  the  present  day.  Such  lines  of  in- 
vestigation were  still  a  trifle  remote  and  academic, 
however.  Underwriting  and  Science  were  merely 
passing  acquaintances  as  yet. 

Nearer  to  the  spirit  of  the  time  was  a  famous  piece 
of  litigation,  known,  by  strange  coincidence,  as  the 
case  of  "Paul  vs.  Virginia,"  Colonel  Samuel  B.  Paul 
vs.  the  State  of  Virginia.  While  it  chiefly  concerned 
one  organization,  the  New  York  Underwriters 
Agency,  it  involved  the  vital  principle  of  the  rela- 
tions of  fire  insurance  to  Federal  control,  and  the  Na- 
tional Board  was  represented  by  counsel.  There  was 
an  earnest  hope  that  insurance  might  be  freed  from 
the  harassment  of  the  infinite  variations  of  State  law, 
by  establishing  its  national  status,  but  the  Supreme 
Court  decided  otherwise. 

Over  all  other  considerations,  however,  there 
loomed  the  huge  subjects  of  classifications  and  rates. 

Since  degrees  of  hazard  varied  so  bewilderingly 
with  local  conditions,  the  construction  of  buildings, 
and  the  nature  of  occupancy,  it  was  necessary  to  have 
some  better  basis  of  charge  than  the  rates  fixed  by 
competition.  This  question  dominated  all  others  and 
was  attacked  with  energy.  A  survivor  states  that,  at 
the  meetings  of  this  period,  the  words  most  frequently 
heard  were,  ''adequate  and  inadequate  rates."     The 

[23] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

National  Board  became  essentially  an  organization 
for  rate-control. 

By  the  time  of  the  third  annual  meeting,  1869, 
tariffs  had  been  prepared  for  eighteen  hundred  and 
twenty-four  places  and  the  work  had  outgrown  its 
facilities.  Accordingly,  a  Rating  Bureau  was  or- 
ganized and  the  territory  of  the  United  States  was 
divided  into  six  departments,  with  a  department  com- 
mittee, an  office,  and  one  or  more  paid  representatives 
in  each. 

But  "human  nature"  still  persisted  in  the  "field." 
Some  agents  were  slow  to  abandon  rate-cutting.  For 
their  discipline,  there  was  made  the  historic  "Chicago 
Compact,"  wherein  thirty-seven  leading  companies 
pledged  themselves  to  remove  any  local  agent  upon 
second  conviction  for  violating  National  Board  rates. 

The  National  Board's  Policy  Form  came  into 
wide-spread  use. 

For  the  first  three  years,  the  progress  was  steadily 
upward.  Rates  were  raised  and  standardized.  The 
business  became  assured  and  profitable,  and  it  was 
freely  admitted  that  "many  companies  had  been  saved 
from  bankruptcy"  through  the  formation  of  the 
board.  Chaos  had  disappeared;  "human  nature" 
had  been  routed;  traditional  foes  had  learned  the  ad- 
vantages of  harmony.  It  was  believed  that  the  mil- 
lennium had  fully  arrived.  Then — the  pendulum 
began  to  swing  the  other  way. 

To  change  the  metaphor,  a  small  cloud  of  anxiety 
floated  over  the  sun  of  complacency.     At  an  Execu- 

[24] 


BRINGING  ORDER  OUT  OF  CHAOS 

tive  Committee  meeting  early  in  1869,  the  secretary 
reported  that  some  of  the  companies  that  had  signed 
the  solemn  Chicago  Compact  seemed  to  be  evading 
its  provisions.  The  cloud  grew  and  blackened 
rapidly.  By  December  of  that  year,  E.  W.  Crowell, 
the  committee  chairman,  used  almost  despairing 
terms.  ^'We  have  used  our  utmost  ejforts,"  he  said 
— and  the  words  are  italicized  in  his  report — "to 
stem  the  tide  of  demoralization.  .  .  .  Candor  com- 
pels us  to  say  that  we  are  not  as  efficient  as  a  board 
to-day  as  we  were  at  our  last  meeting.  .  .  .  The  out- 
side public  being  made  aware  that  our  hold  on  local 
boards  is  not  as  strong  as  formerly,  have  redoubled 
their  efforts  for  cheaper  insurance,  and  many  com- 
panies are  giving  discretionary  power  to  their  agents 
to  meet  this  demand.  If  this  demoralization  goes 
much  farther  ...  it  is  only  a  question  of  time  when, 
in  all  of  the  principal  places  at  least,  the  matter  of 
rates  will  be  a  thing  of  the  past." 

The  millennium  after  all  had  not  arrived;  chaos 
again  loomed  large,  but  board  purposes  were  not  to 
be  abandoned  without  a  struggle.  Two  months  later, 
a  Special  Committee  on  Reorganization  admitted 
that  "bad  faith  among  those  who  have  been  under- 
stood to  consent  to  the  legislation  of  the  board"  was 
proving  a  serious  obstacle  and,  to  meet  it,  proposed 
the  signing  of  an  even  more  solemn  agreement,  "The 
Articles  of  Association  and  Obligation." 

Some  companies  signed  the  articles;  many  would 
not;  "human  nature"  resumed  its  rule,  and  the  Execu- 

[25] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

tive  Committee  made  official  acknowledgment  of  that 
fact  when,  on  February  24,  1870,  it  authorized  the 
local  boards  to  "modify,  suspend,  or  declare  advisory 
any  or  all  rates  fixed  by  them." 
This  ended  the  first  period  of  the  National  Board. 


[26] 


Ill 

THE  STIMULUS  OF  ADVERSITY 

(1871-1872) 


44 


T 


HERE  we  stayed  until  things  got  pretty 
blue,"  says  the  former  clerk  of  the  Na- 
tional Board.  The  bluest  period  lasted 
through  1870  and  most  of  1871.  General  discourage- 
ment ensued,  for,  in  the  words  of  one  member,  "the 
National  Board  was  ruined  by  a  mental  reservation." 
What  was  the  value  of  any  rate-agreement  if  each 
underwriter  had  his  fingers  crossed?  The  great  in- 
suring public  had  one  incessant  cry,  "Give  us  lower 
rates!"  The  army  of  local  agents,  through  that 
anomalous  relationship  wherein  fire  insurance  differs 
from  all  other  lines  of  business,  was  less  in  sympathy 
with  its  companies  than  with  the  public :  it  exerted  a 
tremendous  pressure  and,  at  the  first  sign  of  weaken- 
ing among  the  underwriters,  local-board  restrictions 
ceased  to  exist  at  many  points.  Thus  disappeared 
the  toilsome  structure  of  the  later  '6o's ;  the  forces  of 
destruction  are  swifter  than  those  of  construction. 

The  National  Board,  in  consequence,  passed  prac- 
tically into  a  state  of  suspended  animation.  The 
secretary  was  dismissed  for  lack  of  funds,  but  the 
clerk,  being  married,  was  retained  at  a  low  salary. 

[27] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

There,  ''for  one  year  and  eleven  months,"  he  says,  "I 
was  alone  in  the  little  office  at  156  Broadway;  all  I 
had  to  do  was  to  draw  my  salary,  pay  the  janitor  every 
month,  and  the  rent  every  three  months."  During 
this  period,  one  of  the  members  wrote  to  Mr.  Crowell 
suggesting  that  the  small  treasury-balance  be  spent  in 
a  junketing  trip  and  the  office  discontinued.  "The 
man  to  whom  fire  insurance  was  a  religion"  was  hor- 
rified ;  the  suggestion  was  equivalent  to  sacrilege  and 
it  was  not  renewed.  By  this  slight  margin  did  the 
National  Board  retain  its  hold  upon  the  spark  of  life. 

It  was  reawakened  through  the  operation  of  an 
X-factor;  one  of  those  strange,  unexpected  phenom- 
ena which  occasionally  intrude  upon  the  path  of  the 
ordinary  course  of  events  and  overthrow  all  human 
calculation.  In  this  case  it  took  the  form  of  an  ap- 
palling catastrophe — the  Chicago  fire. 

Whether  due  to  the  restless  hoof  of  a  semifabulous 
cow,  or  to  the  carelessness  of  a  party  of  card-players 
in  a  barn,  the  night  of  October  7,  1871,  witnessed  the 
beginning  of  the  most  destructive  fire  that  the  country 
had  ever  known.  Driven  by  a  high  wind,  the  con- 
flagration swept  all  before  it  for  two  days  until,  in  the 
words  of  Frederick  Law  Olmstead,  it  was  "possible 
from  the  top  of  an  omnibus  to  see  men  standing  on 
the  ground  three  miles  away,  across  what  was  once 
the  densest,  loftiest,  and  most  substantial  part  of  the 
city."  Even  traditional  Chicago  energy  was  momen- 
tarily stunned.  Through  an  almost  uncanny  coinci- 
dence, the  only  fragment  of  literature  saved  from  the 

[28] 


THE  STIMULUS  OF  ADVERSITY 


large  stock  of  the  Chicago  News  Company  was  a 
charred  Bible  found  open  at  the  first  chapter  of  the 
Lamentations  of  Jeremiah,  beginning:  "How  doth 
the  city  sit  solitary,  that  was  full  of  people!  How  is 
she  become  a  widow!  .  .  .  She  weepeth  sore  in  the 
night,  and  her  tears  are  on  her  cheeks." 

Then  Chicago  dried  her  tears  and  thought  of  re- 
construction; she  turned  to  her  insurance  policies. 

There  is  fire-proof  construction  in  companies  as 
well  as  in  buildings;  also,  at  this  period  in  particular, 
there  were  many  companies  that  were  not  fire-proof. 
The  public  had  been  clamoring  for  cheap  insurance; 
it  now  found  that  rate-cutting  is  a  poor  preparation 
for  protection  in  time  of  conflagration.  Weak  com- 
panies literally  went  to  the  wall  by  the  score,  and 
many  of  the  stronger  organizations  were  put  to  the 
severest  straits  to  meet  their  losses.  Excitement  in 
the  Insurance  world  was  naturally  intense.  Under- 
writers rushed  into  the  stricken  city  while  the  ruins 
were  still  smoking,  and  the  first  comfort  of  the  suf- 
ferers came  from  the  assurance  that  many  companies 
would  be  able  to  settle  their  losses  in  full.  This  abil- 
ity was  due  unquestionably,  in  large  degree  to  the 
brief  period  of  sound  practises  which  followed  the 
organization  of  the  National  Board.  The  mortality 
among  companies  would  have  been  far  greater  had  it 
not  been  for  this  fact,  and  the  reconstruction  of  Chi- 
cago would  have  been  correspondingly  retarded. 

The  dormant  board  awakened  in  a  flash,  and  leaped 
into  a  period  of  the  greatest  activity.     Its  next  meet- 

[29] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ing  was,  in  the  words  of  a  survivor,  "a  love-feast." 
Again  it  was  a  question  of  "combine  or  perish" ;  even 
the  blindest  could  read,  by  the  light  of  Chicago's 
flames,  the  suicidal  folly  of  continuing  to  fight  for 
business  at  cutthroat  rates.  Throughout  the  country 
there  was  a  mighty  revival  of  local  boards,  and  rates 
sprang  back  to  the  high  level  of  1868.  This  time, 
there  was  little  resistance  on  the  part  of  the  public; 
the  demand  was  for  protection  that  would  protect. 

The  reform  lasted  for  several  months. 

On  September  18,  1872,  the  president  of  the  Na- 
tional Board  delivered  an  address  in  Chicago  in  the 
course  of  which  he  said : 

Meanwhile,  we  in  New  York  especially  were  watching 
with  great  Interest  to  see  whether  the  tide  had  really 
turned,  and  the  spell  of  virtue  was  to  be  a  lasting  one, 
or  whether,  when  the  first  effects  of  the  great  calamity 
had  passed,  the  companies  would  return  to  old  practises 
and  practically  forget  the  severe  lesson  taught  by  Chicago. 
We  had  not  long  to  wait,  for  sixty  days  had  not  elapsed 
before  complaints  began  to  reach  us  on  all  sides  of  had 
faith,  and  we  saw  that  the  time  had  not  yet  arrived  for 
the  National  Board  to  reassert  itself.  But  when,  soon 
after  the  opening  of  1872,  the  almost  total  exemption  of 
losses  which  had  characterized  the  last  months  of  1871 
began  to  be  supplemented  by  extensive  fires  in  every  part 
of  our  land  .  .  .  the  feeling  began  to  assert  Itself  that 
something  must  be  done  or  the  companies  would  be  in- 
volved In  hopeless  ruin.     Out  of  this  necessity  grew  the 

[30] 


THE  STIMULUS  OF  ADVERSITY 


reorganization  of  the  National  Board,  and  this  time,  on 
the  part  of  those  who  undertook  it,  with  a  determination 
that  there  should  be  no  failure. 

The  process  of  reorganization  was  accompanied  by 
some  plain  talk.  One  of  the  members  did  not  hesi- 
tate to  say: 

What  we  want  is  good  faith  in  the  first  place;  it  is  not 
of  the  least  use  to  send  forth  letters  to  our  agents  direct- 
ing them  to  form  a  board,  and  to  adhere  to  the  regulations 
of  that  board,  unless  we  adhere  to  them  ourselves.  That 
is  the  rock  upon  which  we  have  split.  We  have  solemnly 
resolved  at  our  rneetings,  and  we  have  gone  out  and  given 
contrary  instructions  to  our  agents.  .  .  .  That  is  the 
cause  of  so  many  tariffs  and  rates  being  disregarded  by 
agents.  They  have  received  secret  instructions  from 
their  companies  to  desregard  tarif -rates. 

The  reorganization  took  the  form  of  a  new  consti- 
tution and  by-laws,  a  reduction  in  the  membership  of 
the  Executive  Committee  for  increased  efficiency,  and 
the  appointment  of  Thomas  H.  Montgomery  as  gen- 
eral agent  for  the  National  Board  at  the  unprece- 
dented salary  of  ten  thousand  dollars  a  year. 

Mr.  Montgomery,  who  thus  became  a  prominent 
figure  in  the  Insurance  world,  was  tall,  bearded,  spec- 
tacled, a  little  stoop-shouldered  and  rather  precise, 
but  essentially  able.  The  Insurance  cartoonists  of 
the  period  were  fond  of  picturing  him  as  a  school- 
teacher attempting  to  preserve  order  among  his  un- 

[31] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ruly  company  pupils.  He  threw  himself  into  his 
task  with  energy,  and  undertook  to  straighten  out  the 
tangle  of  the  local  boards,  meeting  with  some  suc- 
cess, but  it  was  not  until  November,  1872,  that  really 
favorable  conditions  were  met  with.  This  time, 
again,  it  required  the  shock  of  great  disaster  to  induce 
a  teachable  mood.  Thirteen  months  after  the  Chi- 
cago conflagration,  the  underwriters  were  thrown  into 
a  panic  at  the  news  that  the  city  of  Boston  was  in 
flames. 

It  was  now  the  turn  of  the  East.  Many  of  the  New 
York  and  New  England  companies  had  carried  com- 
paratively little  insurance  in  Chicago,  and  after  its 
fire  there  were  signs  in  front  of  some  offices,  "THIS 
Company  Had  no  Risks  in  Chicago,"  but  Boston 
swept  away  organizations  that  had  weathered  the  pre- 
ceding disaster.  Here  again  was  illustrated  what  is 
so  often  to  be  noted  in  the  early  history  of  underwrit- 
ing— the  fact  that  the  survival  of  some  company  may 
have  been  due  to  the  foresight  or  instinct  of  an  indi- 
vidual, or  even  to  absolute  good  fortune.  To-day, 
the  dearly  bought  wisdom  of  former  days  causes  a 
general  restriction  of  risks  in  crowded  centers,  but  in 
the  '6o's  and  '70's  the  activities  of  some  local  agent 
might  spell  ruin  in  case  of  a  conflagration. 

One  underwriter  recalls  that  the  comparative  im- 
munity of  his  company  in  both  these  great  fires  had 
been  due  to  a  general  agent  who  was  prejudiced 
against  the  two  cities.  Chicago  he  disliked  for  its 
wooden  buildings  and  its  winds,  and  he  absolutely 

[32] 


THE  STIMULUS  OF  ADVERSITY 


refused  to  take  a  risk.  His  death  occurred  but  six 
months  before  the  disaster,  and  his  successor  felt  no 
such  prejudice;  thus,  all  the  Chicago  losses  of  this 
company  had  been  placed  upon  its  books  within  six 
months. 

Boston  was  objected  to  for  another  reason.  The 
underwriter  remembers  going  to  that  city  with  the 
elder  general  agent,  and  being  asked  his  opinion  of 
an  apparently  solid  row  of  granite  buildings.  The 
younger  man,  impressed  by  their  massive  appearance, 
replied  that  they  looked  like  excellent  risks,  and  was 
taken,  by  way  of  an  object  lesson,  up  to  the  roof. 
Here  he  was  shown  a  wooden  mansard,  topping,  with 
an  undivided  space,  the  entire  row  and  making  an 
excellent  channel  for  the  spread  of  fire  from  one 
building  to  another.  The  general  agent  refused  such 
risks,  and  thus  protected  his  company  from  heavy 
loss.  Later  his  judgment  was  verified  when  the  man- 
sards played  a  large  part  in  the  spread  of  Boston's 
conflagration. 

Those  were  the  days  "when  every  cellar  held  an  in- 
surance company."  Organizations  had  been  formed 
on  every  hand  to  reap  the  harvest  found  in  the  de- 
mand for  insurance  following  the  Chicago  fire.  One 
survivor  of  the  period  says: 

As  soon  as  they  began  making  money,  they  took  to 
fighting.  I  saw  four  companies  on  a  single  corner;  two 
on  one  floor  and  two  in  the  basement.  Some  had  as 
much  as  $50,000  capital  and  some  did  not  have  any.     In 

[33] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

a  certain  town  in  the  West,  where  I  stopped  for  a  few 
days,  a  father  had  a  desk  in  one  corner  of  a  room  and 
his  son  in  another.  The  father,  who  was  a  Board  mem- 
ber, would  take  business  and  would  place  it  with  his  son 
who  was  Non-Board.  In  another  place  where  I  traveled 
there  was  on  one  floor  a  very  strict  member  of  the  Board 
— no  rebating,  no  "whacking"  of  commissions — but  on 
the  floor  below  was  Non-Board  Mr.  Jones,  who  would 
share  in  Mr.  Board  Man's  business.  There  was  little 
supervision  in  the  Middle  West  and  New  York  was  not 
much  better.  The  country  was  full  of  "wildcat"  insur- 
ance. 

There  can  be  small  wonder  that  company  mortality 
was  so  great,  or  that,  in  a  special  emergency  meeting 
of  the  National  Board's  Executive  Committee,  im- 
mediately following  the  Boston  fire,  the  president 
should  have  spoken  of — "A  crisis  greater  by  far  and 
of  an  infinitely  graver  'character  than  we  have  here- 
tofore been  called  upon  to  consider,  for  it  has  brought 
us  face  to  face  with  a  danger  which  we  have  long  felt 
might  exist,  but  which  we  have  been  unwilling  to 
acknowledge  to  ourselves — the  danger  of  the  entire 
absorption  of  the  capital  of  fire-insurance  companies 
doing  business  in  the  United  States  by  extensive,  un- 
looked-for, and  destructive  conflagrations." 

At  this  same  meeting  one  of  the  prominent  com- 
pany officials  exclaimed:  "We  are  all  in  distress! 
Gentlemen,  this  is  a  life  struggle.  One  more  such 
conflagration  ivill  strip  this  country  of  every  fire-in- 

[34] 


THE  STIMULUS  OF  ADVERSITY 


surance  company.  It  will  require  only  one  more. 
You  are  nearer  the  edge  of  the  precipice  than  you 
ever  were  before." 

Once  more  the  centrifugal  force  of  selfish  interest 
was  overcome  by  the  centripetal  force  of  common 
peril,  and  the  warring  companies  united  in  a  general 
advance  of  rates ;  30  per  cent,  increase  in  towns  of 
less  than  fifty  thousand  population,  and  50  per  cent, 
for  larger  cities.  There  was,  say  the  records,  "great 
unanimity." 


[35] 


IV 

THE  DANGERS  OF  PROSPERITY 

(1873-1878) 

SOME  one  has  said  that  the  story  of  civilization 
is  one  of  "progress  through  reaction."  The 
history  of  the  National  Board  is  a  case  in  point. 
The  double  lesson  of  the  two  conflagrations  in  Chi- 
cago and  Boston  now  drew  the  companies  together  in 
strong  solidarity,  and  the  board  enjoyed  a  period  of 
eflfectiveness. 

In  a  large  measure,  the  history  of  the  National 
Board  since  its  organization  has  constituted  the  his- 
tory of  American  fire  insurance;  the  board's  periods 
of  decline  have  reflected  eras  of  demoralization 
throughout  the  business,  and  when  ascendant  it  has 
been  the  dominating  influence  in  the  entire  field.  Its 
action  may  be  compared  to  two  possible  states  of  a 
giant  electromagnet;  sometimes  inert  and  sometimes 
electrified  into  intense  activity,  when  its  lines  of  force 
would  shoot  out  through  every  state  and  draw  chaotic 
local  conditions  into  order. 

The  years  1873  and  1874  were  periods  of  such  ac- 
tivity. In  spite  of  all  faults,  the  board  had  a  well- 
developed  form  of  organization,  a  capable  general 
agent  and  possessed  a  high  degree  of  prestige  with 

[36] 


THE  DANGERS  OF  PROSPERITY 


some  hundreds  of  local  boards.  It  was  thus  in  a  posi- 
tion to  respond  quickly  to  the  new  stimulus.  It  was 
a  colossal  institution  for  those  days,  representing  90 
per  cent,  of  the  fire  insurance  premiums  and  about  95 
per  cent,  of  the  fire-insurance  capital  of  the  United 
States.  Every  factor  had  come  again  into  harmony. 
The  company  officials  were  almost  affectionately  fra- 
ternal; the  local  agents  were  in  a  chastened  frame  of 
mind,  and  the  insuring  public  seemed  fully  awake  to 
the  danger  of  overcheap  insurance.  Rates  were 
high;  business  was  good,  and  companies  that  had 
weathered  the  double  storm  of  Chicago  and  Boston 
losses  began  to  make  money.  In  1874  dividends 
upon  fire-insurance  capital  reached  12.73  P^'"  cent. 

One  of  the  signs  of  the  times  was  the  organization 
of  State  Auxiliary  Boards.  The  first  of  these,  the 
Association  of  the  Northwest,  dates  back  to  February, 
1871,  and  by  February,  1873,  i^  had  been  supple- 
mented by  fourteen  others,  covering  a  total  of  thirty- 
one  states.  Each  state  was  divided  into  districts,  and 
each  district  was  under  the  control  of  a  Committee 
of  Visitation.  Local  boards  were  required  to  adopt 
a  form  of  constitution  and  by-laws  prescribed  by  the 
National  Board.  Authority  and  efficiency  reigned 
supreme,  and  it  was  with  good  reason  that  the  sun  of 
complacency  emerged  from  behind  the  black  cloud 
of  anxiety.  President  Oakley  said  in  his  annual  ad- 
dress (1873)  : 

We  feel  that  we  have  cause  for  congratulation  in  the 

[37] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

harmony  and  concert  of  action  which  prevail  generally 
throughout  the  country,  not  only  among  companies  but 
among  local  and  supervising  agents;  also  that  the 
jealousies  and  dissensions  among  employees  as  well  as 
managers  have  given  place  to  hearty  cooperation  and 
earnest  support  of  mutual  interests;  that  state-  and  local- 
board  organizations  have  been  made  such  effective  auxil- 
iaries to  the  central  organization,  and  that  agents  and 
public,  through  the  medium  of  schedule  and  minimum 
tariffs,  have  been  educated  to  a  better  appreciation  of  the 
hazards  which  enter  into  risks  as  well  as  the  rate  due 
companies  for  granting  them  protection. 

At  this  time  there  was  sounded  again,  w^ith  a  some- 
what louder  tone,  the  new^  note  of  fire  prevention,  that 
later  was  to  become  so  prominent  in  insurance  dis- 
cussion. The  business  had  stood  on  the  verge  of  ruin 
because  of  dangerous  construction  in  two  great  cities ; 
these  cities  were  now  rebuilding,  and  must  be  watched 
to  guard  against  future  danger  and  thus,  although  still 
in  a  limited  way,  the  National  Board  began  to  realize 
that  it  must  deal  with  larger  questions  than  those  of 
rates,  commissions,  policy-forms,  and  legislation.  To 
quote  further  from  the  president's  address: 

With  the  exception  of  New  York,  no  large  city  had  a 
law  which  even  remotely  provided  for  the  erection  of 
superior  buildings,  calculated  In  time  of  trial  to  resist  fire, 
and  even  in  New  York  the  law  was  rendered  almost  nuga- 
tory by  the  manner  in  which  it  was  administered.     The 

[38] 


THE  DANGERS  OF  PROSPERITY 


(Boston)  law  since  Boston's  great  fire  has  been  somewhat 
changed,  but  is  far  from  what  it  should  be.  .  .  .  It  is 
evident,  therefore,  that  if  Boston  is  to  be  rebuilt  properly, 
it  must  be  outside  of  its  laws.  ...  In  Philadelphia,  re- 
cent examinations  have  shown  that  glaring  and  outra- 
geous evasions  of  even  the  moderately  strict  law  of  that 
city  had  been  allowed  by  the  building  inspectors,  whose 
duty  it  was  to  enforce  It.  Now  if  this  be  the  case  in  our 
great  cities,  what  must  it  be  in  our  smaller  ones? 

Owners  of  property,  builders,  and  architects  alike,  seem 
to  have  been  wilfully  blind  to  the  immense  risks  they  were 
Imposing  upon  property  by  the  modern  style  of  building. 
.  .  .  Even  the  insurance  interests,  though  somewhat  alive 
to  the  danger,  were  afraid  to  assert  their  knowledge,  and 
decline  to  Insure  such  buildings,  preferring  to  go  with  the 
multitude;  the  penalty  has  been  paid  for  this  neglect  of 
duty,  at  a  fearful  price  to  us  all.  .  .  .  We  can  do  much  to 
shape  legislation  that  would  benefit  not  only  our  own 
Interests  but  the  whole  country,  by  securing  such  wise  and 
salutary  laws  as  might  prevent  the  recurrence  of  other 
destructive  conflagrations. 

In  this  last  sentence  there  was  a  dawning  conscious- 
ness that  the  board  was  destined  to  become  a  public- 
service  institution  as  well  as  a  business  association. 

Certain  definite  steps  were  therefore  undertaken — 
crude  and  partial  measures  compared  with  those  of 
to-day,  but  immensely  prophetic  of  the  future.  A 
war  upon  wooden  mansards  was  one  of  these.  The 
revival  of  the  mansard  was  contemporaneous  with  the 

[39] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

fashion  of  the  hoop-skirt,  and  was  equally  sensible, 
but  it  seemed  the  last  word  in  impressiveness  to  the 
architect  of  the  period.  It  had  proved  to  be  an  ex- 
cellent device  for  spreading  fire,  but,  even  w^ith  the 
lessons  of  Chicago  and  Boston  fresh  in  mind,  the 
enamored  architects  hated  to  abandon  it.  Mr.  AUi- 
ger,  one  of  the  National  Board  members,  had  this  to 
say  in  a  meeting: 

I  should  like  also  to  direct  the  attention  of  this  board 
to  the  erection  of  four  or  five  new,  large  buildings,  just 
finished  in  Chicago,  having  the  worst  mansard  roofs  ever 
erected.  It  is  scarcely  possible  that  worse  could  be  built. 
This  is  the  case  with  the  Sherman  House,  Palmer's  new 
building,  the  Gardner  House,  and  one  or  two  others. 
The  Pacific  Hotel,  too,  is  constructed  with  this  roof.  I 
think  some  action  should  be  taken,  for  we  are  not  un- 
likely to  have  another  fire  there  shortly. 

There  was  war  made  also  upon  open  elevator 
shafts.  The  elevator  was  still  a  new  convenience, 
and  protective  measures  had  not  yet  been  adopted. 
The  open  shaft  was  as  effective  in  drawing  flames 
from  floor  to  floor  as  was  the  mansard  in  spreading 
them  between  buildings. 

Legislation  was  a  slow  method  of  accomplishing 
these  and  other  building  reforms;  devious  and  dark 
were  the  roads  that  led  through  many  of  the  law-mak- 
ing bodies.  Recommendations  might  be  made,  but 
it  began  to  be  realized  that  the  underwriters  had  a 

[40] 


THE  DANGERS  OF  PROSPERITY 


more  effective  weapon  in  schedule-rating,  by  means 
of  which  good  construction  might  secure  cheaper  in- 
surance rates.  It  is  good  policy  to  make  virtue  profit- 
able. In  this,  a«s  in  other  matters,  effectiveness  de- 
pended upon  joint  action  and  good  faith;  there  was 
little  that  the  companies  might  not  accomplish  if  they 
held  together. 

Then  there  was  the  important  matter  of  getting 
after  the  fire  departments.  Effective  fire-fighting  is 
almost  unbelievably  recent.  Even  London  had  no 
paid  City  Fire  Department  until  1861,  fire-fighting 
being  in  the  hands  of  the  various  insurance  compa- 
nies, which  had  firemen  to  deal  with  blazes  among 
their  clients.  In  the  United  States  semisocial,  semi- 
political  volunteer  corps  for  fire-fighting  were  the 
rule  except  in  a  few  of  the  larger  cities.  The  Na- 
tional Board  has  had  much  to  do  with  bringing  about 
the  change  in  these  conditions. 

The  case  of  Chicago  furnishes  an  example.  As 
this  is  somewhat  important,  a  degree  of  detail  may 
be  permitted. 

Reports  having  been  received  of  bad  conditions, 
the  Executive  Committee,  in  June,  1874,  appointed 
a  special  committee,  consisting  of  Henry  A.  Oakley 
and  James  M.  Rankin  to  visit  Chicago  and  investi- 
gate. The  committee  found  alarming  defects  and 
so  reported  on  July  24th.  In  the  first  place,  the  Fire 
and  Police  Departments  were  both  under  the  control 
of  one  body  of  four  commissioners  of  Police  and 
Fire,  who  gave  five-sixths  of  their  time  to  police 

[41] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

matters  and  one-sixth  to  the  subject  of  fire.  "There 
is  no  question,"  says  the  report,  "but  that  the  Fire 
Department  is  neglected  by  the  board."  Politics 
honeycombed  the  department  as,  for  example: 

At  the  Wells  &  Company  fire,  some  of  the  firemen  were 
accused  of  appropriating  boots  to  their  private  use.  One 
of  the  men  who  was  thus  charged  is  a  prominent  candi- 
date for  the  position  of  foreman,  and  his  appointment 
urged  by  one  of  the  commissioners,  In  opposition  to  the 
chief  marshal;  and  although  the  papers  relating  to  this 
affair  have  been  sent  to  tlie  board,  and  Chief  Marshal 
Benner  has  made  two  appeals  for  an  investigation,  they 
still  remain  tabled. 

Good  discipline  is  paramount  in  an  effective  de- 
partment, but  the  report  continues: 

The  discipline  of  the  department  is  bad;  no  attempt  at 
order  being  made.  .  .  .  When  a  stranger  approaches  an 
engine-house  he  finds  the  men  sitting  or  lounging  about 
the  front  doors,  or  on  benches  or  chairs  on  the  sidewalk, 
some  sleeping  and  others  smoking.  .  .  .  The  men  do  not 
show  any  respect  to  a  superior  or  any  readiness  to  obey 
his  orders.  .  .  .  No  system  of  street-patrol  exists;  the 
men  are  not  obliged  to  account  for  their  time,  and  no 
company  or  other  drill  is  ever  practised. 

"No  pride"  was  found  in  keeping  the  engine-house 
in  proper  condition;  "the  first  floors  look  like  stables, 
most  of  them  having  wooden  street  pavements  for 

[42] 


THE  DANGERS  OF  PROSPERITY 


floors.  After  bed-hours  there  is  no  one  on  the  engine 
floors."  As  to  buildings  and  exposures,  the  report 
says  in  part: 

The  immense  territory  covered  with  frame  structures 
makes  the  city  very  inflammable.  The  grade  of  Chicago 
has  been  raised  from  time  to  time ;  consequently  there  are 
blocks  of  frame  buildings  built  on  timbers  with  no  sep- 
aration between  them,  and  also  brick  structures  where  a 
continuous  passage  for  fire  exists  around  a  whole  block. 
These  cavities  under  buildings  and  sidewalks  are  re- 
ceptacles for  straw,  shavings,  and  other  inflammable  rub- 
bish, which  are  liable  to  be  fired  by  carelessness  or  evil- 
disposed  persons  at  any  time. 

The  system  of  fire-wardens,  to  whom  is  intrusted  the 
inspection  of  buildings,  does  not  work  satisfactorily,  pol- 
itics interfering  with  their  duties.  ...  It  would  appear 
that  buildings  can  be  erected  in  any  way  or  style  that  suits 
the  convenience  of  the  interested  parties.  Irrespective  of 
the  law  governing  the  same,  no  effort  being  made  to  en- 
force the  law. 

The  lumber  district  of  Chicago  is  a  dangerous  locality; 
immense  piles  of  lumber  extend  as  far  as  the  eye  can 
reach,  and  all  are  piled  so  as  to  admit  the  air,  thus  making 
good  conductors  for  fire.  There  are  to  be  found  in  this 
district  steam  planing  and  molding  mills,  steam  box-fac- 
tories, grain  elevators,  etc.,  in  fact  a  forest  of  inflammable 
materials.  Locomotives  run  through  the  heart  of  this 
district  continually,  a  spark  from  one  might  start  a  fire  at 
any  time,  especially  when  the  wind  Is  blowing  from  off  the 

[43] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

prairie.  ...  A  fire  starting  here,  if  not  arrested  at  once, 
would  soon  be  of  such  magnitude  that  human  efforts 
would  be  powerless  to  stop  it. 

It  is  hard  to  realize  that  these  conditions  were 
found  in  a  city  which  had  received  the  most  severe 
lesson  of  modern  times  less  than  three  years  before. 
The  citizens  might  be  indifferent,  but  the  underwrit- 
ers could  not  afford  to  be.  The  National  Board  re- 
solved upon  drastic  action.  A  telegram  was  sent  to 
the  Chicago  local  board,  as  follows : 

We  demand  the  immediate  establishment  of  a  special 
fire-patrol  of  at  least  one  hundred  men,  by  the  city.  No 
committee  will  come,  but  National  Board  companies  will 
forward  their  demands  to  be  complied  with  within  a  fixed 
time,  or  companies  will  retire. 

In  other  words,  if  Chicago  did  not  immediately 
mend  its  ways,  its  citizens  would  find  themselves 
without  fire-insurance  protection.  The  Chicago 
board  wired  back: 

Committee  of  Chicago  Board  waited  on  mayor,  and 
asked  patrol  of  one  hundred  men.  Mayor  had  not  con- 
stitutional power  to  appoint,  promised  to  send  recom- 
mendation to  council  at  next  meeting,  Monday  night. 
Underwriters  and  citizens  alive  to  importance  of  speedy 
judicious  action  for  protection. 

The  National  Board  thereupon  formulated  six 
peremptory  demands,  and  threatened  to  discontinue 

[44] 


THE  DANGERS  OF  PROSPERITY 


the  Chicago  business  of  its  companies  upon  the  first 
of  the  following  October  unless  these  demands  were 
complied  with.     They  were,  in  brief: 

1.  The  establishment  of  permanent  fire-limits. 

2.  The  enactment  of  a  stringent  building-law,  and  the 
provision  for  its  enforcement. 

3.  The  complete  reorganization  of  the  Fire  Depart- 
ment, the  eradication  of  political  influence,  the  establish- 
ment of  discipline,  and  the  Improvement  of  equipment. 

4.  An  Increase  In  water-facilities. 

5.  The  establishment  of  a  Fire-Marshal's  Bureau. 

6.  The  passage  of  a  law  for  the  gradual  removal  of 
special  hazards. 

Naturally,  the  authorities  of  warned,  endangered, 
recently  stricken  Chicago  hastened  to  comply  with 
these  reasonable  demands?  They  did  no  such  thing; 
there  were  political  difficulties  in  the  way. 

Then  the  National  Board  took  the  next  step.  On 
September  23d,  one  week  before  the  expiration  of 
the  time-limit,  the  Executive  Committee,  at  its  morn- 
ing session,  unanimously  adopted  a  resolution  recom- 
mending to  all  Board  companies  that  they  withdraw 
from  the  Lake  metropolis.  This  started  something. 
The  news  was  flashed  to  Chicago,  and  at  the  after- 
non  session  a  telegram  was  read  from  the  Chicago 
Citizens'  Association  asking:  "Can  General  Shaler 
be  secured  as  chief  of  our  Fire  Department?  An- 
swer." 


[45] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

An  affirmative  reply  was  sent,  and  General  Shaler 
subsequently  went.  In  spite  of  this  fact,  and  of  the 
agitation  of  the  Chicago  public,  now  genuinely 
alarmed,  the  Board  companies  wisely  carried  out 
their  threat,  and  their  example  was  followed  by  cer- 
tain of  the  Non-Board  companies,  which  likewise 
withdrew. 

The  Chicago  Citizens'  Committee  now  took  the 
situation  in  hand,  and,  a  few  weeks  later,  it  for- 
warded an  earnest  request  that  the  National  Board 
should  send  a  committee  to  see  what  had  been  accom- 
plished. The  committee  arrived  on  November  20th, 
was  received  with  extreme  consideration,  not  only  by 
the  Citizens'  Association,  but  also  by  the  Chicago 
city  authorities,  and  saw  such  evidences  of  progress 
that,  upon  its  recommendation,  the  National  Board 
withdrew  its  ban.  Thus  was  won  a  notable  victory 
for  public  interest  through  the  tremendous  power  of 
united  action  by  the  insurance  companies.  This  was 
public  service  of  a  high  order  but — and  herein  lies 
its  greatest  value — its  motives  were  those  of  practical 
business  and  not  of  altruism. 

Less  drastic  means  were  found  to  improve  condi- 
tions at  many  other  points.  The  powerful  weapon 
of  schedule-rating,  judiciously  used,  proved  most  ef- 
fective, as  shown,  for  example,  in  the  following  reso- 
lution: 

Resolved,  That  in  consideration  of  the  introduction  of 
a  complete  system  of  Water  Works  in  the  city  of  Roches- 

[46] 


THE  DANGERS  OF  PROSPERITY 


ter,  New  York,  that  the  Local  Board  of  that  city  be  in- 
structed to  abate  the  20  per  cent,  advance,  of  December, 
'72,  on  all  risks  covered  by  the  new  water  works  of  the 
city — and  no  other — to  take  effect  from  the  date  at  which 
the  water  works  were  accepted  by  the  city  authorities. 

The  fact  that  in  1866  only  fifteen  cities  in  the 
United  States  had  steam  fire-engines,  while  in  1876, 
ten  years  later,  two  hundred  and  seventy-five  were  so 
equipped,  is  some  evidence  of  the  board's  influence. 
As  the  general  agent  said  in  a  report  in  1874: 

The  maintenance  of  good  rates  for  the  past  fifteen 
months  has  been  the  means  of  fostering  more  improve- 
ments in  the  Water  Supply  and  Fire  Departments  of  dif- 
ferent towns  than  the  same  space  of  time  can  show  in  any 
previous  period  of  the  history  of  underwriting  in  this 
country. 

The  records  of  this  busy  period  are  full  of  other 
details,  such  as  the  formation  of  a  Bureau  of  Statis- 
tics, the  failure  of  efforts  to  secure  Federal  legisla- 
tion, the  employment  of  three  special  agents  to  super- 
vise local  agents,  the  payment  of  rewards  to  secure 
convictions  for  arson,  the  rapid  progress  of  the 
''three-fourths"  clause,  which,  some  believed,  would 
bring  about  an  ''underwriters'  millennium,"  the  ef- 
forts to  secure  the  adoption  of  a  uniform  policy- 
form,  and,  in  particular,  the  appearance  of  that  San 
Jose  scale  of  the  insurance  profession,  the  Valued- 
Policy  Law.     This  unlovely  measure,  then  known  as 

[47] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

the  "Wisconsin  Law,"  after  the  experimentally- 
minded  state  that  gave  it  birth,  was  later  to  produce 
wide  havoc,  and  its  discussion  will  be  reserved  for  a 
later  chapter.  But  no  honest  chronicle  should  omit 
to  record  its  advent. 

During  this  period,  also,  the  National  Board  out- 
grew its  surroundings  and  moved  into  larger 
quarters. 

Then,  once  more,  came  the  familiar  reaction. 

The  virile,  efficient,  successful  organization  was 
actually  too  virile,  too  efficient,  too  successful;  it 
failed  to  recognize  the  dangers  of  prosperity. 

The  last  preceding  demoralization  had  come  from 
lack  of  coherence  within  the  organization;  the  new 
one  came  from  overconsciousness  of  power.  The 
united  companies  had  given  the  public  sound  protec- 
tion and  had  brought  about  valuable  public  improve- 
ments, but  they  had  reacted  too  far  in  the  matter  of 
rates — they  had  established  excessive  premiums.  It 
is  even  possible  that  they  did  not  fully  realize  this 
fact,  but  the  public  did  and,  in  particular,  the  one 
hundred  new  companies  that  sprang  up  and  began  a 
lively  competition  for  business  at  cut  rates,  recog- 
nized that  the  high  prices  of  the  Board  companies 
furnished  their  opportunity. 

For  a  time,  the  iron  discipline  of  the  National 
Board  held  out  against  this  influence,  but  it  speedily 
grew  serious.  Board  vs.  Non-Board  conflicts  arose 
at  various  points.  This  was  notably  the  case  in  New 
England,  and  the  New  England  Provisional  Com- 

[48] 


THE  DANGERS  OF  PROSPERITY 


mittee  made  heroic  efiforts  to  hold  it  in  check;  its  re- 
port of  April  26,  1876,  says: 

During  the  past  year  we  have  held  over  one  hundred 
meetings.  .  .  .  We  have  revised  the  tariff  for  thirteen 
places,  made  partial  revisions  in  seventy;  we  have  written 
over  seventeen  hundred  letters,  and  have  acted  upon  over 
four  thousand  applications  for  revisions  in  rates  and  new 
ratings. 

Nevertheless,  the  conflict  spread.  In  Boston  there 
was  a  31.5  per  cent,  loss  in  premium  receipts,  largely 
from  this  cause,  and  Board  companies  began  to  drop 
away  from  their  solidarity.  The  committee  report 
was  signed  by  six  of  the  strongest  men  in  the  profes- 
sion: M.  Bennett,  Jr.,  L.  J.  Hendee,  George  L. 
Chase,  Henry  Kellogg,  Dwight  R.  Smith,  and  J.  S. 
Parish.  These  men  saw  with  unhappiness  that  their 
hopes  were  being  undermined  by  the  destructive  in- 
fluence, and  the  report  proceeds  with  this  bitter  com- 
ment: 

The  withdrawal  of  companies  from  our  organization 
with  the  argument  that  they  shall  stay  in  the  board  when 
it  suits  them,  and  go  out  where  they  please,  observing 
National  Board  rules  and  principles  where  it  is  for  their 
interest;  in  other  words  taking  advantage  of  board  experi- 
ence and  labor  without  lending  it  any  sympathy  or  sup- 
port, pecuniarily  or  otherwise,  and  who  believe  in  the 
hoard  simply  because  it  ties  other  companies  up  to  rates, 
and  allows  them  to  shade  them  just  enough  to  steal  the 

[49] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

business,  is,  at  best,  a  narrow,  selfish,  and  extremely  un- 
wise policy. 

A  crash  came  in  the  latter  part  of  1875  and  the  be- 
ginning of  1876.  Twenty  companies  resigned ;  eight- 
een were  dropped;  two  were  expelled. 


[50] 


V 

"REMOVING  THE  BONE  OF  CONTENTION" 

(1876-1877) 

IN  spite  of  all  reversals,  the  National  Board,  in  the 
first  decade  of  its  existence,  had  made  a  substan- 
tial showing.  In  that  time,  the  amount  of  fire 
insurance  in  force  had  increased  from  $3,428,000,000 
to  $6,273,000,000,  and  the  annual  premiums  from 
$29,529,000  to  $64,900,000.  There  had  been  a  nota- 
ble improvement  in  Fire  Departments,  in  water-sys- 
tems, in  building  laws,  in  the  introduction  of  fire- 
patrols,  and  in  the  punishment  of  arson.  The  busi- 
ness had  made  progress  in  organization,  in  classifica- 
tion, and  in  the  collection  of  statistics,  but  "foremost 
among  these  benefits,"  said  the  president,  in  his  annual 
address  (April,  1876),  "I  place  the  elevation  of  the 
business  from  one  almost  of  contempt  to  a  front  rank, 
both  in  importance  and  usefulness,  among  other  pro- 
fessions." 

Nevertheless,  when  these  words  were  spoken,  the 
board  had  already  taken  some  steps  down  the  slope 
of  the  longest  descent  that  it  was  destined  ever  to 
travel.  The  full  extent  of  this  was  mercifully  hid- 
den, but  there  was  a  general  feeling  of  uneasiness, 
which  showed  itself  in  the  appointment  of  a  Com- 

[51] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

mittee  of  Fifteen  to  consider  what  should  be  done. 
The  committee  studied  the  situation  and  rendered  a 
majority  and  minority  report. 

Both  reports  agreed  that  there  must  be  no  more 
fining  of  agents.  After  all,  this  was  America,  not 
Europe.  During  1875,  "Schoolmaster"  Montgom- 
ery and  his  assistants,  the  supervising  agents,  had  used 
the  birch  rather  freely  upon  fractious  pupils  in  the 
local  boards.  There  had  been  twenty-nine  trials; 
one  hundred  and  twenty-one  local  agents  had  been 
convicted  of  violating  rules  and  tariffs;  fines  had 
been  imposed  to  the  extent  of  more  than  six  thousand 
dollars,  and,  what  is  remarkable,  most  of  it  had  been 
collected ;  but — the  agents  were  heard  from,  and  the 
voices  of  protesting  agents  have  carrying  power. 

These  voices  penetrated  the  doors  of  the  private 
offices,  and  company  officials  began  to  squirm  un- 
easily. Some  of  them  accused  the  Executive  Com- 
mittee of  "harassing  members  w4th  edicts  on  trivial 
matters,"  or  of  subjecting  them  to  "vexatious  and 
frivolous  annoyances" ;  some  wrote  stiffly  formal,  and 
others  regretful  letters  of  resignation;  certain  leading 
foreign  companies  withdrew.  The  upshot  was  a 
wide-spread  defection,  and  surviving  members  looked 
into  each  other's  faces  blankly. 

It  is  not  strange  that  the  annual  meeting  of  April, 
1876,  developed  a  highly  charged  atmosphere. 
After  the  board  had  listened  to  the  well-rounded 
periods  of  President  Oakley's  eulogistic  review,  and 
had  elected  his  successor  in  the  person  of  George  L. 

[52] 


HENRY  A.  OAKLEY 


GEORGE  L.  CHASE 


Howard     Insurance     Company,    of    New         Hartford    Eire    Insurance    Company,    of 
York.      President,    1870   to    1S76.  Hartford.      President,    1876   to    1877'. 


ALFRED   G.   BAKER 

Franklin    Insurance    Company,    of   Phila- 
delphia.      President,     1877    to    1880. 


M.   RENXETT,  JR. 

Connecticut      Insurance      Company,      of 
Flartford.      President,    1880   to    if" 


DANIEL  A.  IIEALD 

Home  Insurance  Company,  of  New 
York.  One  of  the  signers  of  the  call 
for  the  original  convention.  President, 
1881   to   1891. 


D.  W.  C.  SKILTON 

Phoenix    Insurance    Company,    of    Hart- 
ford.    President,    i8gi    to    1894. 


E.   A.   W  ALTUN 

Citizens'    Insurance    Company,    of    Xe\ 
York.     President,    1894    to    1896. 


WILLIAM  B.  CLARK 

«Etna   Insurance  Company,  of  Hartford, 
i'resident,     1896    to     1897. 


"REMOVING  THE  BONE  OF  CONTENTION" 

Chase,  of  the  Hartford,  a  tall,  slender  man  with  the 
head  of  an  Olympian  Zeus,  it  turned  to  the  amazing 
array  of  resignation  letters  that  had  accompanied  the 
general-agent's  report.  It  went  into  committee  of 
the  whole  and  there  fulminated. 

The  ensuing  debate  was  warm;  the  pages  of  the 
record  glow  with  heat  even  after  the  lapse  of  forty 
years.  Mr.  Lamport,  of  the  Continental,  led  the 
attack  and  cited  instances  of  the  unresponsiveness  of 
the  Executive  Committee  to  the  woes  of  the  local 
agents.  In  Columbia,  South  Carolina,  it  seemed, 
there  had  formerly  been  no  Non-Board  agency.  A 
local  dry-goods  merchant  had  been  carrying  $80,000 
insurance  upon  his  stock,  but  when  he  added  a  mil- 
linery department,  the  supervising  agent  ordered  a 
higher  rate  upon  his  whole  stock.  The  merchant,  in 
consequence,  closed  out  his  new  department  and  asked 
to  have  his  rate  restored,  but  long  negotiation  with  the 
all-powerful  Executive  Committee  failed  to  bring 
it  back,  and  the  local  agent  in  disgust  finally  turned 
away  from  his  Board  companies,  and  became  an 
active  Non-Board  factor.  Other  cases  were  referred 
to,  and  the  general  criticism  was  to  the  effect  that  the 
Executive  Committee  was  too  masterful  in  its  exer- 
cise of  almost  unlimited  power.  Members  of  that 
committee  who  were  present  naturally  thought  other- 
wise; they  also  expressed  themselves,  but  the  meeting 
resulted  in  the  appointment  of  the  Committee  of  Fif- 
teen, already  referred  to. 

It  was  an  earnest  contest  between  restless  Democ- 

[53] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

racy  and  efficient  Autocracy;  the  fire-insurance  pro- 
fession was  not  yet  ready  for  "Kultur." 

It  is  not  necessary  to  follow  the  complicated  meas- 
ures by  which  the  Committee  of  Fifteen  and  others 
sought  to  restore  workable  conditions ;  reaction  was 
once  more  in  flood  and  its  tide  could  not  be  stayed 
with  a  broom.  A  semiannual  meeting  in  September 
did  not  avail  and  a  "Meeting  of  Conference"  was 
called  in  the  week  before  Christmas.  Here  a  bomb 
was  fired  by  Mr.  Skilton,  of  the  Phoenix.  He  offered 
a  resolution  whose  preamble  stated  frankly: 

Whereas,  It  is  plainly  evident  that  the  future  success 
of  the  National  Board  of  Fire  Underwriters  depends 
wholly  on  a  full  and  firm  confidence  among  the  members 
in  each  other,  and  assuming  that  it  Is  possible  to  restore 
this  confidence,  it  being  granted  that  it  is  now  practically 
lost,  be  it — etc. 

— in  short,  he  proposed  that  the  board  abandon  its 
rate-making  powers  in  favor  of  the  local  boards,  that 
it  cut  down  all  expenses  of  operation  to  the  "lowest 
possible  minimum,"  and  that  it  discharge  all  of  its 
salaried  special  or  field-agents,  getting  such  help  as 
possible  from  the  agents  of  the  companies.  This  was 
earnestly  debated;  but  the  economy  idea  found  lodg- 
ment and  a  Committee  on  Retrenchment  was  unani- 
mously voted. 

This  committee  reported  at  the  annual  meeting  in 
the  following  April  (1877).     It  recommended  that 

[54] 


"REMOVING  THE  BONE  OF  CONTENTION" 

the  yearly  expenses  be  reduced  from  $113,000  to 
$15,000. 

This  meeting  was  historic.  The  strongest  men  of 
the  profession  were  in  attendance,  and  all  were  aware 
of  impending  crisis.  Upon  a  somewhat  similar  pre- 
ceding occasion,  the  Chicago  and  Boston  fires  had 
restored  solidarity,  but  now  no  conflagration  was  in 
sight;  the  sole  question  was  as  to  the  inherent  vitality 
of  the  board  as  then  constituted. 

The  Retrenchment  Committee's  report  was  fol- 
lowed by  a  debate  of  many  hours.  This  was  not 
academic;  it  was  serious,  even  emotional.  It  was 
participated  in  by  men  who  had  built  eleven  years  of 
their  lives  into  the  National  Board,  who  had  hoped 
for  it,  striven  for  it,  sacrificed  for  it.  Here  was  a 
vast  machine,  the  creation  of  their  hearts  and  brains; 
but  a  short  time  before  it  had  seemed  to  be  fulfiling 
their  dearest  dreams  in  its  splendid  effectiveness ;  they 
had  glowed  with  pride  as  they  had  watched  it,  and 
now  they  were  asked  to  consign  it  to  the  scrap-heap : 
so  it  seemed  to  them.  The  National  Board  had  been 
primarily  concerned  in  rate-control;  rate-control  re- 
quired a  large  organization;  the  merest  fraction  of 
such  an  organization  could  not  be  maintained  on  $15,- 
000  a  year.  Retrenchment  meant  the  abandonment 
of  all  that  seemed  most  important.  It  was  more  than 
a  business  disappointment;  it  was  a  personal  bereave- 
ment— a  tragedy. 

Rudolph  Garrigue,  the  president  of  the  Germania 
Insurance  Company,  led  the  attack.     He  was  big, 

[55] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

bearded,  aggressive,  and  independent.  With  Teu- 
tonic directness,  he  drove  straight  to  the  heart  of  the 
subject  when  he  said : 

Members  have  felt  the  disadvantage  of  restraint,  and 
have  frequently  acted  on  their  own  judgment,  disregard- 
ing pledges,  and  the  result  has  been  demoralization  and 
loss  of  faith  in  one  another.  This  is  a  patent  fact; 
everybody  knows  it;  and  few  members  to-day  have  any 
confidence  in  members  at  large.   .   .   . 

Rates — definite,  unmistakable  and  inviolable — are  de- 
sirable, but  they  have  been  proved  impracticable.  He 
who  observes  his  pledges  and  adheres  to  his  rates  on 
principle,  has  to  see  his  business  swallowed  up  by  a  fellow 
member  who  acts  on  his  own  judgment,  when,  if  he  felt 
at  liberty  to  do  the  same,  he  might  often  retain  it  at  profit- 
able rates  below  taril?,  but,  respecting  his  pledge,  he  can 
not,  and  he  loses  his  faith  in  his  fellow  member,  and,  by 
consequence,  in  the  efficiency  of  the  board. 

In  view  of  all  these  facts  ...  is  it  not  wise  to  pre- 
serve the  vitality  of  the  board  for  attainable  purposes,  by 
removing  the  bone  of  contention  presented  by  a  rigid 
tarifl;  ? 

There  were,  he  said,  six  forms  of  service  that  could 
still  be  rendered  upon  the  reduced  appropriation. 
These  were : 

1.  Maintaining  archives. 

2.  Collating  statistics. 

3.  Dealing  with  legislation. 

[56] 


"REMOVING  THE  BONE  OF  CONTENTION" 

4.  Combating  arson, 

5.  Disseminating  knowledge  of  fire  causes. 

6.  Advising  local  boards. 

He  urged  that  the  character  of  the  work  be  changed 
to  correspond. 

Mr.  Hope  was  one  of  those  to  whom  the  abandon- 
ment of  Board  ideals  was  most  painful.  In  a  long 
speech,  full  of  eloquence  and  deep  feeling,  he  argued 
against  such  reduction.  "I  feel,"  he  said,  "that  for 
the  National  Board  to  take  a  position  that  practically 
abandons  the  question  of  rates  is  humiliating,"  and 
his  voice  quivered  with  emotion  as  he  emphasized  the 
word;  .  .  .  "In  less  than  twenty  days  there  will  not 
be  a  local  board  with  rates  from  ocean  to  ocean."  He 
believed,  he  said,  that  it  would  be  possible  to  adopt 
"such  regulations  as  will  conserve  the  interests  of  the 
companies  as  they  stand  to-day";  and  he  continued 
passionately: 

Without  providing  for  this  (a  nucleus  for  rate- 
control)  we  shall  destroy  the  whole  organization  before 
May  ends;  and  then  we  shall  fight  from  hand  to  hand 
throughout  the  land,  and  who  It  Is  that  shall  take  the 
hindmost  I  do  not  know.  I  believe  most  profoundly  that 
the  National  Board  has  not  done  Its  duty.  It  has  been 
over  and  over  again  paroxysmal  In  its  action.  We  have 
not  begun  at  the  foundation  to  do  our  work.  We  have 
not  educated  the  people.  As  a  result,  we  find  that  the 
courts  are  against  us,  that  jurors  are  against  us,  that  the 

[57] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Press  is  against  us,  and  that  the  legislatures  are  against 
us.  They  levy  all  sorts  of  taxes;  they  give  us  the  most 
ungodly  verdicts  that  man  ever  dreamed  of — to  their  own 
hurt,  and  they  do  not  know  it.  Why?  Because  we  have 
not  educated  them.  We  must  begin  fundamentally  to 
teach  the  people  that  the  interest  of  the  insurance  com- 
panies and  of  the  community  is  identical,  and  that  they 
cannot  cheat  an  insurance  company  without  harming  the 
people.  I  believe  that  this  can  be  taught  the  people  .  .  . 
and  in  a  few  years  we  shall  have  the  people  educated  to 
such  an  extent  that  they  will  not  give  a  verdict  for  a 
scoundrel,  and  will  not  assume  that  an  insurance  company 
is  a  fraud.  Something  like  this  would  be  my  plan.  .  .  . 
I  believe  that  by  adopting  the  measure  I  have  suggested, 
we  shall  preserve  much  that  is  worth  preserving;  and  if, 
finally,  the  thing  drops  out  from  under  our  hands,  we,  as 
a  board,  will  not  be  responsible.  We  may  say  to  this 
man  or  to  that  man,  "Thou  art  the  man,"  but  it  will  not 
be  said  of  us  as  a  board.  I  am  opposed  to  it  (the  report) 
in  all  its  details. 

This  got  under  the  skin  of  Mr.  Garrigue,  and  he 
retorted:  ''He  merely  tells  us  that  what  we  say  is 
not  worth  shucks;  that  something  better  exists,  but 
that  which  is  much  better  has  not  yet  been  named." 

Then  Mr.  Heald  took  the  floor  and  analyzed  the 
situation  in  a  dispassionately  legal  way.  "  The  main 
question,"  he  said,  "is  whether  or  not  we  can  maintain 
obligatory  rates."  He  reviewed  the  causes  of  the 
present  emergency,  the  claim  of  certain  companies  for 

[58] 


"REMOVING  THE  BONE  OF  CONTENTION" 

floor-rights  that  others  would  not  concede,  the  in- 
ternal strife,  the  withdrawal  of  large  foreign  com- 
panies and  others.  "What  was  the  result?"  he  ex- 
claimed; "from  that  day  forth,  we  found  the  opposi- 
tion to  the  rates  established  by  this  board  increased 
tenfold — in  energy,  in  respectability  and  largely  in 
financial  strength,  until  .  .  .  the  Non-Board  ele- 
ment can  take  the  entire  business  of  the  country,  with 
the  exception  of  thirty  or  forty  towns.  .  .  .  We  can- 
not blind  ourselves  to  the  fact  that  we  now  have  to 
contend  with  a  competition  which  is  nearly,  if  not 
quite,  as  strong  for  limited  purposes  as  ourselves. 
They  have  the  advantage  of  an  army  within  walls, 
while  we  are  without."  Under  the  circumstances,  he 
"could  not  vote  for  obligatory  rates  one  day  longer." 

That,  after  all,  was  the  logic  of  the  situation;  the 
substance  of  rate-control  having  passed,  it  was  useless 
to  continue  the  empty  form.  In  the  end,  though 
many  had  their  say,  the  reduction  in  expense  was 
voted  and  the  second  period  of  the  National  Board 
came  to  an  end  with  the  death  of  fire-insurance  autoc- 
racy. 

The  somewhat  hollow  honor  of  the  presidency  was 
conferred  upon  stout  and  optimistic  Alfred  G.  Baker, 
of  the  Franklin  Fire  Insurance  Company,  who  recog- 
nized present  conditions  and  predicted  their  better- 
ment by  announcing  the  cheerful  motto — ^^Resurgam" 
— "I  shall  rise  again." 


[59] 


VI 

EBB  TIDE  AND  LOW  WATER 

(1878-1888) 

NOW  ensued  a  period  of  decline.  For  eleven 
years,  the  National  Board  wasted  steadily 
away,  like  an  invalid  in  a  lingering  sickness. 
At  first,  it  refused  to  recognize  its  own  invalidism 
and,  in  the  year  following  its  abandonment  of  rate- 
making,  made  an  effort  to  restore  this  function.  A 
circular  letter  w^as  sent  to  all  the  companies  issuing 
stock  insurance  policies — and  there  were  more  than 
four  hundred  of  them — asking  whether  they  were 
ready  to  get  together  on  the  basis  of  a  rate-agreement. 
Replies  were  received  from  about  half  the  number, 
and  most  of  these  were  favorable,  but  the  exceptions 
were  too  numerous  for  safety.  The  burnt  child 
dreads  the  fire,  or,  as  Mr.  Heald  phrased  it,  "It  is 
needless  for  us  to  undertake  to  reestablish  rates 
throughout  the  country,  unless  we  have  the  readhe- 
sion  of  certain  large  and  respectable  companies  who 
ceased  to  cooperate  with  us."  The  effort  therefore 
was  abandoned.  President  Baker,  his  optimism 
somewhat  impaired,  omitted  "Resurgam"  from  his 
1879  speech,  and  chose  a  new  motto — "The  Time 
Is  Not  Yet." 

[60] 


EBB  TIDE  AND  LOW  WATER 


In  the  mean  time,  General  Agent  Montgomery  had 
resigned,  as  a  result  of  the  reduced  resources,  and  the 
supervision  of  the  remaining  activities  devolved  upon 
the  secretary  of  the  Executive  Committee,  Henry  K. 
Miller,  a  man  who  was  to  serve  the  board  with  fidel- 
ity and  zeal  until  his  death,  in  1910. 

Annual  meetings  were  held  with  dwindling  at- 
attendance;  the  hopeful  tone  faded  from  the  speeches, 
and  members  dwelt  fondly  upon  the  glories  of  the 
past.  The  board  retained  its  organization  and  went 
through  a  form  of  activity  in  the  matter  of  arson  re- 
wards, insurance  statistics,  and  a  few  other  matters, 
but  more  and  more  it  became  a  society  that  lived  with 
its  memories.  Obituary  notices  of  deceased  members 
occupied  a  larger  and  larger  place  in  the  president's 
annual  address.  The  atmosphere  was  not  cheerful. 
A  cartoonist  represented  Mr.  Montgomery  having 
his  luggage  removed  from  the  house  of  death;  a 
casket  marked,  *'N.  B.,"  stood  in  the  center  of  the 
room,  and  mourners  from  the  Executive  Committee 
wept  copiously  in  the  background.  This  was  a  mis- 
take ;  the  board  was  not  yet  dead,  but  there  were  times 
when  one  must  listen  closely  to  detect  a  sign  of  life. 

Insurance  energy  began  to  run  in  other  channels. 
At  some  point  in  this  period,  the  exact  date  is  un- 
certain, that  mysterious  body,  known  as  the  ''Under- 
writers Alliance,"  came  into  being.  It  circulated 
among  its  members  daily  reports  on  gray  paper,  con- 
taining such  cryptic  utterances  as,  "Number  41  has 

been  accused  of  cutting  rates  at ;  what  has  Num- 

[61] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ber  41  to  say  about  it?"  These  daily  reports  were 
supposed  to  be  kept  carefully  under  lock  and  key. 
Some  claim  that  the  alliance  was  an  "inner  circle," 
whose  primary  purpose  was  to  obtain  control  over  the 
administration  of  the  National  Board,  and  others  that 
it  was  merely  for  mutual  interest;  but,  in  any  event, 
it  was  discontinued  after  several  years. 

Much  more  important  was  the  United  Fire  Under- 
writers. This  sprang  from  a  resolution  that  Mr. 
Hope  introduced  at  the  1880  meeting,  calling  for 
an  effort  ''to  unite  the  underwriters  of  the  country  in 
an  organization  whose  purpose  shall  be  to  make  the 
truths  of  insurance  economy  more  widely  known  to 
policy-holders  ...  as  well  as  insurance  officers  and 
managers."  It  seemed  to  be  assumed  that  an  entirely 
new  organization  was  necessary. 

There  is  a  cult  that  preaches  the  possibility  of  at- 
taining fame  and  fortune  through  a  change  of  name, 
and  it  is  a  sign  of  the  times  that  the  insurance  profes- 
sion was  ready  to  make  a  test  of  the  efficiency  of  this 
doctrine.  The  National  Board  had  failed,  but  a  new 
gathering  of  the  same  men,  with  the  same  "human 
nature,"  under  the  same  conditions  might  succeed  if 
only  it  called  itself  something  else.  The  Executive 
Committee  put  out  a  "feeler"  to  the  companies;  the 
response  was  encouraging,  and  in  October,  1880,  some 
two  hundred  companies  enthusiastically  organized 
The  United  Fire  Underwriters  in  America  in  the 
National  Board  rooms.  It  was  to  deal  with  all  sub- 
jects except  rates  and  commissions. 

[62] 


EBB  TIDE  AND  LOW  WATER 


It  is  interesting  to  contrast  the  dignified,  sadly 
reminiscent  atmosphere  of  the  board  meetings  with 
the  vigorous  optimism  of  the  new-born  body,  meeting 
in  the  same  rooms  and  containing  many  of  the  same 
members.  For  a  time,  it  seemed  that  the  change  in 
name  had  been  effective ;  once  more  all  problems  were 
to  be  solved  out  of  hand.  Even  the  excepted  sub- 
jects were  not  neglected ;  one  of  the  contemporaneous 
cartoons  shows  a  husky  young  giant  about  to  place  a 
tough-looking  nut,  labeled,  "Rates  and  Commis- 
sions," between  his  powerful  teeth  while  a  haggard, 
wraithlike  figure  of  the  National  Board  watched  him 
skeptically.     The  caption  follows: 

U.  F.  U.  in  A. — Crack  it?     Of  course  I  will. 

N.  B. — Well,  perhaps  he  will.  I  used  to  think  I  was 
the  man  with  the  Iron  Jaw,  once.  Now  I'm  the  Man 
with  the  Broken  Jaw.     I  guess  I'll  bet  on  the  nut. 

In  the  end,  the  nut  won.  The  U.  F.  U.  in  A.  ter- 
minated its  joyous  young  life  in  four  years,  but  the 
pallid  patient,  though  fading  steadily  year  by  year, 
never  ceased  to  breathe. 

Most  important  of  all  the  new  development  of  the 
period  was  the  organization,  in  1879,  of  a  body  that 
has  played  a  large  part  in  subsequent  insurance  his- 
tory— the  (Western)  Union.  One  of  the  factors  that 
had  led  to  the  downfall  of  the  centralized  authority 
was  sectional  jealousy  based  upon  the  varying  inter- 
ests of  different  parts  of  the  country,  the  differing 

[63] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

lines  of  business,  difference  in  methods  of  construct- 
ing buildings,  etc.  It  therefore  seemed  wise  to  ex- 
periment with  organization  along  more  homogeneous 
lines  by  giving  each  section  a  body  of  its  own,  and  the 
(Western)  Union  was  at  once  recognized  as  pro- 
phetic of  a  new  aid  to  underwriting.  The  National 
Board  president  in  his  annual  address  referred  to  it 
as  "the  one  bright  effort  amid  the  darkness  of  this 
single  year."  It  had  been  preceded,  in  1879,  by  the 
Association  of  Fire  Underwriters  of  Missouri,  and 
was  followed  by  the  Southeastern  Tarifl  Association, 
in  1882;  the  New  England  Insurance  Exchange,  in 
1883;  the  Association  of  Fire  Underwriters  of  Ar- 
kansas, in  1883;  the  Underwriters  Association  of  the 
State  of  New  York,  in  1883;  the  Pacific  Insurance 
Union,  in  1884;  the  Minnesota  and  North  Dakota 
Fire  Underwriters  Association,  in  1885;  the  Ken- 
tucky and  Tennessee  League  of  Fire  Underwriters, 
in  1889;  and  others  at  still  later  dates. 

In  1882,  the  invalid  made  a  sudden  effort  to  regain 
vitality.  Mr.  Hendee,  of  the  ^Etna,  offered  a  reso- 
lution limiting  agents'  commissions  to  15  per  cent, 
save  in  certain  specified  cases,  and  the  resolution  was 
carried. 

With  the  single  exception  of  rates,  this  subject  of 
commissions  was  the  most  dangerous  of  any  in  the  en- 
tire field  of  insurance.  It  continually  was  insisted  in 
board  meetings  that  the  agents  were  receiving  too 
large  a  compensation  for  their  work.     One  of  the 

[64] 


EBB  TIDE  AND  LOW  WATER 


favorite  forms  of  recreation  always  had  been  that  of 
resolving  to  limit  commissions.  It  had  been  done  in 
1866,  1867,  1869,  1872,  1873,  1874,  1875,  1876  and 
1879.  These  resolutions  generally  were  "unani- 
mously adopted."  Sometimes  they  were  followed, 
after  a  few  months,  by  other  resolutions  to  "suspend" 
or  "postpone"  or  "declare  exceptions." 

At  no  time  is  it  probable  that  they  caused  much  ap- 
prehension among  the  agents  themselves,  although 
the  limitation  of  commissions  occasionally  stood  for 
a  brief  period  as  National  Board  law.  The  follow- 
ing incident  related  by  one  of  the  older  underwriters 
may  shed  some  light: 

At  one  time  I  received  a  circular  from  the  National 
Board  asking  whether  I  had  allowed  any  commission  in 
excess  of  the  board  standard  of  15  per  cent.  I  replied 
that  I  had  in  one  instance  and  gave  particulars. 

Soon  afterward  I  was  summoned  before  a  meeting  of 
the  Executive  Committee.  They  were  seated  around  a 
large  table  and  looked  very  grave.  It  was  stated  that  I 
had  been  guilty  of  a  serious  misdemeanor;  what  had  I  to 
say  for  myself?  I  answered  that  I  had  openly  acknowl- 
edged what  was  the  common  secret  practises.  I  told 
them  that,  to  my  personal  and  positive  knowledge,  every 
underwriter  in  the  room,  with  one  single  exception,  had 
been  doing  the  same  thing. 

Mr.  got  up  and  asked  Indignantly  if  I  included 

him.     "No,"  I  said,  "you  are  the  one  exception."     A  far^ 

[65] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

away  look  came  into  the  eyes  of  the  rest.  They  changed 
the  subject  and  the  meeting  adjourned.  I  never  heard 
of  it  again. 

It,  therefore,  was  one  of  the  profoundest  symptoms 
of  the  National  Board's  depleted  vitality  that  it 
should  have  allowed  several  years  to  pass  without 
taking  action  upon  the  subject  of  this  general  custom. 
It  was  almost  like  a  man's  neglecting  to  shave  and 
change  his  linen,  and  when  Mr.  Hendee,  whose  sin- 
cerity no  man  could  question,  proposed  that  commis- 
sions be  limited  to  15  per  cent.,  Mr.  Oakley  exclaimed 
joyously,  "I  think  it  is  the  first  entering  wedge  toward 
the  reestablishment  of  the  National  Board."  The 
very  sound  of  the  good  old  resolution  recalled  to  mind 
the  days  that  were  no  more.  The  proposal  was  car- 
ried quite  as  unanimously  as  usual.  Strangely  famil- 
iar, too,  are  certain  notes  that  began  to  appear  in  the 
minutes  of  succeeding  months,  such  as : 

Resolved,  that  In  view  of  the  difficulty  of  enforcing  the 
15-per-cent.  commission  rule  .  .  .  Washington,  D.  C,  be 
made  an  excepted  city. 

...  At  a  subsequent  meeting  In  June,  New  Jersey  was 
added  to  the  excepted  territory,  owing  to  Its  position 
between  New  York  and  Philadelphia  and  the  Influence 
throughout  the  state  of  the  brokerage  system  prevailing 
In  those  cities.   .  .   . 

.  .  .  The  most  difficulty  has  been  experienced  In  the 
state  of  Virginia  ...  It  seems  a  proper  question  for  the 

[66] 


EBB  TIDE  AND  LOW  WATER 


Board  to  consider  whether  any  rehef  shall  be  granted 
there  .  .  . 

Resolved,  That  the  Special  Committee  of  Five  be  in- 
structed to  correspond  with  the  Individual  members  of 
the  National  Board  with  a  view  to  ascertaining  how  far 
each  Company  carries  out  the  present  15-per-cent.  com- 
mission rule,   .  .  .  etc.,  etc. 

The  growing  difficulties  are  reflected  in  the  fact 
that,  at  its  April,  1885,  meeting  the  Executive  Com- 
mittee directed  Secretary  Miller  to  circulate  a 
paper,  beginning: 

The  undersigned  companies,  by  their  signatures  hereto, 
signify  their  willingness  to  cooperate  in  establishing  a 
uniform  rate  of  commissions  to  agents,  and  a  uniform  rate 
of  commissions  to  brokers.  .  .  . 

He  did  so,  and  at  the  annual  meeting  in  May  re- 
ported that  one  hundred  and  forty-two  companies 
had  signed  the  paper.  This  resulted  in  a  call  for  a 
meeting  of  the  signers,  which  meeting,  held  in 
June,  formulated  a  stringent  "commission  compact," 
intended  to  solve,  once  and  for  all  time,  this  harassing 
problem ;  incidentally,  it  was  not  to  become  operative 
until  signed  by  one  hundred  and  twenty  companies. 

The  first  ninety  signatures  came  with  comparative 
ease  and  every  one  felt  such  encouragement  that  a 
cheerful  air  once  more  pervaded  headquarters.  A 
well  attended  twentieth-anniversary  meeting  was  held 

[67] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

in  June,  1886,  and  much  hopeful  talk  was  indulged 
in.  At  this  time  it  was  voted  to  rescind  the  1882 
resolution  and  to  replace  it  by  the  "compact."  Then 
the  "compact"  signers  were  all  declared  eligible  to 
board  membership  by  special  resolution.  It  was  as- 
sumed, and  the  wish  was  father  to  the  thought,  that 
nothing  now  remained  but  to  secure  the  other  thirty 
signers,  elect  them  all  to  membership  and,  voila, 
there  again  would  stand  the  old  National  Board  in 
full  plenitude  of  power!  Extraordinary  efforts  were 
made,  but  the  next  seven  months  added  but  five  more 
names — still  twenty-five  short.  Then  the  pledge  was 
modified,  and  eight  more  signatures  wrung  from  the 
unwilling  residue.  There,  finally,  it  stuck;  the  last 
convulsive  effort  of  the  old  National  Board  law- 
making machine  was  firmly  motionless  on  dead  cen- 
ter. A  discouraged  committee  so  reported  at  the 
May,  1887,  meeting  of  the  Executive  Committee. 
All  realized  that  the  old  regime  had  passed. 

This  was  the  year  when,  for  the  only  time  in 
its  history,  there  was  no  annual  meeting  of  the 
board. 

The  lowest  point  was  reached  in  the  spring  of  1888. 
The  membership  was  reduced  to  twenty-five  and, 
while  the  annual  meeting  was  not  omitted,  it  was  at- 
tended by  but  eight  of  the  faithful.  Before  drawing 
the  curtain  over  this  darkest  period,  it  may  be  well 
to  let  President  Heald  sum  up  the  general  insurance 
situation  in  the  concluding  words  of  his  Annual  Ad- 
dress ;  he  said : 

[68] 


EBB  TIDE  AND  LOW  WATER 


Two  years  ago  ...  a  list  was  given  of  five  hundred 
and  ninety-two  companies  that  had  failed  or  retired  from 
business  since  i860.  The  aggregate  capital  of  such  com- 
panies was  then  stated  to  have  been  $81,203,441,  with 
assets  to  the  amount  of  $134,413,777  lost  in  or  with- 
drawn from  the  business.  Since  that  time  the  dreary  list 
has  been  lengthened  by  an  addition  of  fifty-three  Com- 
panies, having  capital  amounting  to  $8,178,210,  and 
assets  of  $10,283,068  at  time  of  retirement. 

This  brief  summary  of  the  past  is  full  of  meaning,  and 
suggestive  of  what  may  yet  be  in  store  for  us  in  the  near 
future,  unless  radical  action  Is  taken  at  once  to  recover 
lost  ground  by  the  abandonment  of  pernicious  practises, 
criminal  competition,  and  this  suicidal  increase  of  term- 
business  based  upon  a  ruinous  annual  rate  and  the  un- 
sound formula  of  calculation  in  growing  use  during  the 
past  ten  years.  With  the  ratio  of  burning  fearfully  on 
the  increase,  with  rates  reduced  below  the  safety-point 
of  an  ordinary  ratio  of  burning,  and  expenses  steadily 
increasing,  the  time  is  at  hand  when  the  survival  of  the 
fittest  may  become  a  problem  of  no  easy  solution  with 
even  the  best  of  our  fire  companies. 

I  can  do  no  less  than  press  upon  you  the  importance, 
yea,  the  vital  necessity,  of  united  and  vigorous  effort  to 
turn  back  this  advancing  tide  of  unwholesome  compe- 
tition that  has  already  well-nigh  engulfed  our  business, 
and  threatens  ultimate  destruction  to  the  companies  we 
serve,  and  the  loss  to  ourselves  of  all  we  should  hold  dear 
as  underwriters  seeking  to  honor  the  profession  we  have 
chosen. 

[69] 


VII 

THE  RETURN  OF  THE  TIDE 
(1888-1892) 

IT  may  be  well  to  pause  at  the  threshold  of  a  new 
era  and  grasp  the  general  significance  of  the  pre- 
ceding twenty-two  years'  events.  There  are  some 
respects  in  which  the  business  of  fire  insurance  is 
highly  individual,  and  others  in  which  it  is  fairly 
typical  of  Big  Business  as  a  whole.  In  a  sense,  the 
strange  alternations  of  fortune  that  attended  the  Na- 
tional Board  furnished  a  series  of  gigantic  laboratory 
tests,  of  which  the  lessons  might  be  widely  applied. 
One  cannot  fail  to  be  conscious  of  the  presence  of  big, 
elemental  forces  that  aided,  diverted,  or  checked  in  a 
way  that  was  often  greatly  at  variance  with  the  pur- 
pose of  those  in  authority. 

A  business,  hardly  ranked  by  any  other  in  size,  ex- 
tent, and  general  importance  to  the  country,  had  been 
close  to  ruin  through  unrestrained  competition.  Its 
companies,  in  extremities,  had  sought  a  defensive 
pact  to  limit  competition.  Under  the  stimulus  of  two 
great  fires,  this  instinctive  action  had  resulted  in  the 
formation  of  the  largest  and  most  powerful  business 
organization  that  the  United  States  had  ever  seen. 
The  power  thus  attained  had  been,  for  the  most  part, 

[70] 


i 


THE  RETURN  OF  THE  TIDE 


wisely  applied  for  the  mutual  interest  of  the  business 
and  the  community,  but  it  had  fixed  its  reward  at  too 
high  a  figure.  There  had  been  no  apparent  purpose 
or  even  consciousness  of  extortion.  The  companies 
had  been  in  peril  through  undercharge  and  now 
merely  "played  safe,"  but  the  result  had  been  unwise 
overcharge.  At  this  point,  the  power  to  enforce  had 
begun  to  crumble.  Those  in  authority  being  too  close 
to  the  subject  for  proper  perspective,  the  symptoms, 
and  not  the  real  causes  of  the  disease,  had  come  in 
for  treatment,  and  the  results  had  been  disastrous. 
Coercion  had  been  tried,  and  this  made  an  oppor- 
tunity for  the  very  competition  it  had  sought  to 
avoid. 

Thus,  long  before  the  day  of  the  trusts,  it  had  been 
demonstrated  that,  in  the  fire-insurance  field,  at  least, 
no  combination  that  restrained  trade  or  exacted  ex- 
cessive prices  could  long  endure ;  this  lesson  was  never 
forgotten. 

The  difficulty  of  maintaining  voluntary  trade- 
agreements  had  been  illustrated  anew.  In  spite  of 
various  instances  of  bad  faith,  the  standard  of  ethics 
among  underwriters  was  probably  higher  than  that 
obtaining  in  most  lines  of  business.  None  other  pre- 
sented such  temptations.  The  vast  fabric  of  Amer- 
ican fire  insurance  covered  every  city,  town,  village, 
and  country  district;  it  employed  scores  of  thousands 
of  agents  and  protected  millions  of  individuals.  At 
every  point  the  pressure  for  lower  rates  was  urgent 
and  unceasing.     It  is  really  a  source  of  wonder  that 

[71] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

there  should  have  been  periods  of  even  comparative 
unity. 

For  a  third  lesson,  it  had  been  shown  that  the  purely 
technical  side  of  insurance  furnished  an  insufficient 
basis  for  such  an  organization  as  the  National  Board. 
While  its  needs  could  best  be  served  by  private  capi- 
tal, the  business  had  become  national  in  its  extent,  and 
semipublic  in  its  functions ;  it  called  for  a  wider  range 
of  constructive  thought.  Unconsciously  and  inevi- 
tably, the  board  now  began  to  take  on  the  character 
of  a  public-service  institution.  This  development  is 
an  inspiring  example  of  the  process  of  evolution  in 
action. 

This,  however,  is  somewhat  ahead  of  the  point 
which  the  story  has  now  reached.  May,  1888,  found 
the  general  fire-insurance  situation  badly  demoralized 
and  the  National  Board  close  to  extinction.  It  was 
necessary,  it  appeared,  to  remove  another  **bone  of 
contention,"  that  of  commission  control,  from  its 
wasted  frame;  the  disheartened  officials  performed 
the  final  operation.  The  last  action  of  the  annual 
meeting  was  the  adoption  of  the  following  resolution: 

In  'view  of  the  fact  that  there  is  now  no  rule  of  the  or- 
ganization limiting  commissions  to  ij  per  cent.,  that  rule 
having  been  rescinded  by  the  vote  at  the  meeting  of  July 
20,  1886,  and  the  commission  compact  substituted  for  the 
said  rule  having  failed  to  receive  the  number  of  signatures 
required  to  make  It  operative,  therefore  be  It 

Resolved,  that  the  officers  and  Executive  Committee  of 

[72] 


THE  RETURN  OF  THE  TIDE 


the  Board  be  requested  to  take  measures  to  increase  the 
membership,  in  order  to  strengthen  the  organization,  and 
more  efficiently  promote  the  purposes  for  which  it  was 
originally  institued. 

An  invitation,  embodying  this  resolution,  was  sent 
out  to  Non-Board  companies  with  gratifying  results; 
a  warm  Southern  breeze  blew  across  the  ice-bound 
field,  and  the  patient  began  to  show  unmistakable 
signs  of  returning  strength.  At  the  meeting  of  May, 
1889,  nearly  fifty  representatives  were  in  attendance 
and  there  was  a  renewed  air  of  cheerfulness. 

Freed  at  last  from  the  dominance  of  rates  and  com- 
missions, the  work  of  the  committees  now  began  to 
stand  out  in  stronger  relief  and  the  board  assumed 
more  of  its  present  form  of  activities.  An  important 
action  was  taken  in  the  fall  of  1889,  when  the  Com- 
mittee on  Fire  Departments,  Fire-Patrol  and  Water- 
Supply  was  authorized  to  engage  an  expert  to  "ex- 
amine into  the  present  condition  and  needs  of  the  fire 
departments  and  fire  facilities  throughout  the  coun- 
try." Assistant  Chief  John  W.  Smith,  of  the  Brook- 
lyn Fire  Department,  was  engaged  as  inspector  of 
Fire  Departments  for  the  National  Board,  and  active 
work  was  begun. 

It  was  during  this  period  (in  1890)  that  the  Fac- 
tory Insurance  Association  was  organized  by  some  of 
the  stock  companies  in  order  to  meet  the  competition 
of  the  "factory  mutuals."  The  origin  of  these  mu- 
tuals  is  discussed  in  a  later  chapter.     For  many  years 

[73] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

they  had  been  especially  active  in  New  England 
where  by  advanced  methods  of  fire  protection  they 
had  cut  the  cost  of  insurance  among  their  members 
to  a  remarkably  low  figure.  It  had  become  difficult 
for  the  stock  insurance  companies  to  compete  with 
them  for  the  better  class  of  factory  risks.  By  1883, 
the  mutuals  carried  $350,000,000  of  business  in 
Massachusetts  and  Rhode  Island  alone.  Soon  after 
this,  the  Phenix  (of  Brooklyn),  the  Queen  and  the 
New  Hampshire  Fire,  all  stock  companies,  fol- 
lowed in  the  foot-steps  of  the  mutuals,  and  coop- 
erated in  improving  their  factory  risks,  particularly 
by  means  of  installing  sprinklers,  with  a  corre- 
sponding rate  reduction.  The  results  were  so  sat- 
isfactory that  other  underwriters  began  to  take 
notice,  and  a  Factory  Improvement  Committee  was 
formed  in  the  New  England  Exchange.  This  was 
followed,  in  1887,  by  the  New  England  United 
Bureau  of  Inspection,  and  three  years  later,  the  idea 
broadened  into  the  Factory  Insurance  Association 
and  its  sister  organization,  the  Western  Factory  In- 
surance Organization.  These  Associations  act  both 
as  solicitors  of  business  and  inspectors  of  risks;  they 
deal  with  certain  classes  of  factories,  and  have  greatly 
reduced  loss  ratios  and  premium  rates  by  means 
of  fixed  standards  of  fire  protection  and  moral 
hazard. 

Perhaps  no  feature  of  the  time  occasioned  more 
anxious  thought  on  the  part  of  underwriters  than  the 
great  spread  of  "Valued  Policy"  legislation.     Nearly 

[74] 


THE  RETURN  OF  THE  TIDE 


twenty  years  earlier,  the  state  of  Wisconsin  had  en- 
acted such  a  law,  as  already  noted  in  Chapter  IV,  and 
since  that  time  the  idea  had  been  growing  disastrously 
popular  with  legislatures  in  other  states.  It  provided 
that  a  policy-holder,  suffering  a  total  loss,  could  col- 
lect the  entire  face-value  of  his  policy  no  matter  what 
might  have  been  the  actual  value  of  the  building  or 
goods  destroyed;  the  policy,  itself,  was  regarded  as 
evidence  of  the  value  of  the  risk.  In  the  case  of  an 
honest  policy-holder,  there  was  no  special  menace  in 
such  a  provision,  but  it  opened  delightful  vistas  of 
easy  money  before  the  eyes  of  crooks;  a  little  judi- 
cious use  of  kerosene  and  the  touch  of  a  match — that 
completed  the  simple  process.  If  the  loss  were  total 
— and  that  could  be  managed — the  policy,  backed  by 
the  law,  settled  the  amount  to  be  paid  and  forbade 
dispute.  In  the  words  of  the  New  Hampshire  In- 
surance Commissioner  in  1881,  "The  most  adroit 
rogues  themselves  could  not  devise  a  more  efficient 
scheme  to  facilitate  the  burning  of  property  and  the 
enriching  of  participants  in  the  crime." 

Clouds  of  suspicious  smoke  began  to  rise  plentifully 
over  Wisconsin  and  some  other  states.  Each  cloud 
had  a  silver  lining  to  the  pleased  vision  of  some  enter- 
prising citizen,  but  the  companies  that  furnished  the 
silver  were  less  enthusiastic.  They  naturally  realized 
that  the  "Valued  Policy"  law  increased  the  hazard 
and  raised  their  premium-rates  wherever  it  prevailed. 
Thus  the  honest  many  were  compelled  to  pay  for  the 
crooked  few;  things  usually  work  that  way.     At  the 

[75] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

1890  meeting,  the  president  reported  that  this  law  had 
caused  an  increase  in  the  ratio  of  burning  of  .7205  for 
each  $100  of  premiums,  in  Wisconsin;  had  cost  the 
policy-holders  of  the  state  $876,087,  in  increased 
premiums,  and  had  cost  the  companies  $1,767,506  be- 
yond this  amount.  Incidentally,  it  may  be  said  that 
Wisconsin  has  made  some  slight  amends  for  its  dis- 
astrous innovation  by  being  the  first  state  (1915)  to 
repeal  its  "Valued  Policy"  legislation,  which  it  has 
recently  branded  as  "absolutely  vicious."  Such  laws, 
however,  are  still  in  force  in  twenty-two  states,  and 
similar  bills  are  frequently  introduced  in  the  legisla- 
tures of  others. 

The  National  Board  was  active  in  a  campaign  of 
education  to  check  the  spread  of  this  measure. 

It  was  during  this  period  also  that  "Anti-Compact" 
legislation  became  especially  prominent.  The  pub- 
lic, failing  to  realize  that  premium-rates  must  rest 
upon  certain  fundamental  laws,  preferred  to  consider 
them  as  a  matter  of  competitive  bargaining,  and 
various  legislatures  undertook  to  enforce  this  view, 
by  means  of  laws  making  it  a  crime  for  underwriters 
to  attempt  to  secure  uniformity.  The  first  signs  of 
this  legislation  had  appeared  a  few  years  earlier.  In 
1883,  it  is  said,  certain  Grand  Rapids  furniture  manu- 
facturers opposed  the  rates  of  the  Grand  Rapids  local 
board  and  caused  an  "Anti-Compact"  measure  to  be 
introduced  in  the  Michigan  legislature,  where  it 
failed  of  passage.  Ohio,  in  1885,  was  the  first  state 
to  pass  such  a  law;  Michigan  followed  in  1887,  Ne- 

[76] 


THE  RETURN  OF  THE  TIDE 


braska  and  Texas  in  1889;  after  that  they  came  thick 
and  fast.  This  form  of  legislation,  as  later  will  ap- 
pear, is  to-day  one  of  the  most  serious  deterrents  to 
sound  underwriting. 

An  illuminating  incident  occurred  in  New  Hamp- 
shire in  1884  and  1885.  A  wealthy  and  influential 
citizen  of  Portsmouth  owned  a  large  hotel  which 
was  damaged  by  fire.  The  hotel  had  been  insured 
by  a  prominent  company  and  the  adjustment  was  en- 
trusted to  an  adjuster  of  high  reputation;  neverthe- 
less, the  owner  felt  dissatisfied  with  the  payment, 
and,  in  a  spirit  of  revenge,  struck  back  through  the 
legislature.  He  inspired  the  passage  of  a  law  which 
contained  an  "Anti-Compact"  provision,  a  "Valued 
Policy"  measure  and  other  objectionable  features. 
The  consequent  withdrawal  from  the  state  of  all  the 
companies  without  exception  as  to  stock  or  mutual 
— the  New  Hampshire  companies  only  remaining — 
was  one  of  the  notable  events  of  that  year  in  the 
fire  insurance  business.  The  withdrawal  compact, 
signed  by  every  company,  continued  in  force  four 
and  one-half  years,  and  the  original  draft  is  now 
hanging  on  the  walls  of  the  Insurance  Library  As- 
sociation of  Boston. 

In  1891,  Mr.  Heald  brought  his  long  administra- 
tion to  an  end.  He  had  been  elected  president  in 
1881,  to  succeed  M.  Bennett,  Jr.,  of  the  Connecticut 
Fire  Insurance  Company,  and  it  had  been  an  eventful 
decade.  D.  W.  C.  Skilton,  of  the  Phoenix  (of  Hart- 
ford), was  chosen  to  succeed  him. 

[77] 


VIII 

THE  GROWTH  OF  FIRE  PREVENTION 
(1892-1896) 

THE  year  1892  found  the  National  Board  ani- 
mated with  a  new  spirit.     The  rejuvenated 
organization  had  set  its  face  in  another  direc- 
tion ;  it  was  conscious  of  an  altered  destiny. 

The  president,  in  his  annual  address,  struck  the 
key-note  at  once.  He  called  attention  to  the  $140,- 
000,000  fire  waste  in  1891,  and  added,  "That  the  peo- 
ple are  beginning  to  realize  that  this  enormous  waste 
is  becoming  a  national  burden  of  serious  import  is 
quite  apparent.  .  .  .  The  press  and  the  people  seem 
to  have  arrived  at  the  conviction  that  the  destruction 
of  property  by  fire  is  increasing  far  more  rapidly  than 
the  growth  of  population  or  the  development  of  the 
country,  and  that  unless  it  can  be  checked,  the  cost  of 
insurance  to  the  public  must  be  greatly  increased; 
otherwise  there  will  be  a  still  greater  withdrawal  of 
capital  from  the  business  of  fire  insurance."  Then 
he  enunciated  the  modern  doctrine  in  Fire  Insurance, 
in  these  words : 

The  old  theory  .  .  .  that  a  risk  should  be  written  as 
found,  and  a  rate  adequate  to  the  hazard  be  charged  is 
fast  becoming  obsolete,  and  to-day  all  local  and  district 

[78] 


I 


THE  GROWTH  OF  FIRE  PREVENTION 

associations,  and  all  syndicates  for  writing  great  Indus- 
tries are  aiming  to  secure  improvements  in  construction 
and  greater  care,  and  all  favor  the  introduction  of  auto- 
matic and  other  appliances  for  the  prevention  and  extin- 
guishing of  fires,  the  Inducement  to  the  assured  being  a 
greatly  reduced  rate  for  this  lessening  of  hazard. 

From  this  time,  the  question  of  fire  prevention  oc- 
cupied an  increasingly  large  place  in  insurance  dis- 
cussion and  was  recognized  as  one  of  the  chief  func- 
tions of  underwriting.  Once  again,  a  change  was  due 
to  the  pressure  of  outside  conditions,  to  the  require- 
ments of  environment,  not  to  altruism. 

The  new  spirit  showed  itself  in  various  activities. 
A  letter  was  written  to  President  Harrison  asking  that 
he  recommend  to  Congress  legislation  on  the  investi- 
gation of  fire  causes,  on  the  construction  of  buildings, 
on  the  regulation  of  special  hazards,  and  on  require- 
ments for  greater  public  carefulness.  The  companies 
had  made  many  efforts  to  secure  national  legislation 
on  fire  insurance;  now  they  moved  to  make  fire-pre- 
vention a  national  matter.  This  was  followed  by  a 
letter  to  the  governors  of  the  different  states  in  the 
matter  of  state  legislation  for  investigating  fire  causes, 
and  this,  in  turn,  by  letters  to  all  of  the  insurance  com- 
missioners asking  their  cooperation  to  the  same  end. 
Such  a  law,  drafted  by  underwriters,  was  introduced 
into  the  New  York  legislature.  A  pamphlet  on  fire- 
waste  was  given  wide  circulation. 

Meanwhile  there  had  been  a  conference,  at  the 

[79] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

rooms  of  the  board,  with  committees  of  architects, 
builders  and  fire  engineers  on  the  subject  of  improv- 
ing construction,  and  a  little  later,  the  National  Board 
was  represented  at  the  National  Convention  of 
builders.  A  model  building  law  was  introduced  at 
Albany,  and  there  were  great  hopes  of  its  passage, 
but  it  was  killed  in  a  familiar  political  way  '^through 
the  efforts  of  members  of  the  Assembly  from  Buffalo, 
Jamestown,  and  a  number  of  small  cities,  to  secure 
exemption  for  their  cities."  The  board,  however, 
printed  a  number  of  copies  of  the  proposed  law  and 
circulated  them  throughout  the  country  as  a  model  for 
legislation  in  other  places.  In  1896  it  voted  to  frame 
a  still  better  measure  to  be  known  as  the  "National 
Board's  Model  Building  Law."  There  were  many 
similar  activities. 

It  was  during  this  period  that  there  occurred  a  de- 
velopment which  was  not  without  dramatic  values. 
The  underwriters  had  become  aware  of  a  new  foe  in 
the  field,  a  mysterious,  unseen  influence  working 
powerfully  against  them.  There  had  begun  to  be  a 
marked  increase  in  losses  in  the  better  class  of  risks; 
the  companies  were  suffering  where  they  had  felt 
most  secure.  Could  the  spirit  of  arson  be  spreading 
among  the  best  citizens?  This  was  unthinkable. 
Then  they  awakened  suddenly  to  a  consciousness  that 
the  hidden  enemy  was  electricity.  The  world  had 
entered  upon  a  new  age. 

Heretofore,  electricity  had  given  but  little  con- 
cern.    When  electric  lights  had  made  their  appear- 

[80] 


THE  GROWTH  OF  FIRE  PREVENTION 

ance,  it  was  generally  believed  that  they  would 
greatly  decrease  the  perils  of  oil  and  gas  illumination, 
but  now  it  was  found  that  they  presented  still  greater 
dangers  of  their  own,  and  this  was  true  of  motors, 
trolley-cars  and  other  devices  of  the  new  era.  Some 
of  the  greatest  mercantile  fires  were  traced  to  this 
cause.  It  was  a  dangerous  flank  attack  from  an  un- 
expected quarter  and  required  prompt  measures  of 
defense.  Accordingly,  on  August  17,  1892,  there 
was  an  emergency  meeting  of  insurance  electric-light 
inspectors  at  the  National  Board  rooms,  and  repre- 
sentatives of  many  underwriters'  associations  were  in 
attendance.  It  resulted  in  the  formation  of  the  Un- 
derwriters International  Electric  Association  and  the 
formulation  of  the  National  Board  Electric  Code  to 
govern  installations. 

Some  of  the  discussion  of  the  time  shows  the  depth 
of  concern  that  was  felt.  Said  a  member  at  one  of  the 
board  meetings: 

We  cannot  assume  that  the  most  reputable  merchants 
have  all  at  once  become  criminals.  We  find  that  our 
better  class  of  risks  is  burning  in  a  greater  ratio  than  ever 
before,  and  that  there  are  mysterious  causes  at  work, 
which  we  do  not  understand  .  .  .  that  mysterious  ele- 
ment I  believe  to  be  electricity.  ...  I  believe  this  Is  what 
is  burning  us  out,  and  running  up  our  mortality-rate  to 
such  an  unprecedented  figure.  .  .  .  When  we  consider 
the  appalling  Increase  In  fires  during  the  last  eighteen 
months  we  may  well  be  startled.     We  are  standing,  I 

[81] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

repeat,  in  the  presence  of  a  mysterious  element  which  no 
one  is  at  present  able  to  fathom. 

Incidentally,  Mr.  Heald  had  an  opportunity  to 
register  an  interesting  prediction.     He  said: 

I  remember  when  about  1855  ^^  1^5 7>  with  the  discov- 
ery of  petroleum,  and  the  coming-in  of  kerosene  and  aft- 
erward of  gasoline,  we  felt  we  were  confronted  with  a 
very  difficult  problem,  and  kerosene  fires  were  frequent — 
the  greatest  ones  we  had  were  traceable  to  that  agency. 
We  did  not  know  much  about  it,  but  gradually  we  got  a 
little  knowledge,  until  at  last,  we  felt  that  we  understood 
very  well  the  properties  of  petroleum  in  its  various  forms 
and  products,  and  could  prescribe  rules  to  make  the  use 
of  it  safe.  ...  I  do  not  see  why  we  should  not  do  the 
same  with  our  knowledge  of  electricity.  Let  us  go  as  far 
as  we  know  now.  ...  By  and  by,  after  we  shall  have 
had  experience  enough,  and  after  the  scientists  shall  have 
continued  their  experiments  and  research  long  enough, 
we  shall  be  able  to  formulate  a  set  of  rules,  a  compliance 
with  which  makes  the  use  of  electricity  as  safe  as  the  use 
of  kerosene  or  petroleum  in  any  form  is  to-day.  We  may 
be  able  to  send  messages  without  the  use  of  a  wire. 

This  v^^as  on  May  18,  1893 — several  years  before 
the  appearance  of  wireless  telegraphy. 

By  1896,  the  Electrical  Bureau  of  the  National 
Board  was  deeply  engaged  in  a  study  of  the  new 
hazard  and  was  issuing  frequent  illustrated  reports, 
which  were  earnestly  studied  by  underwriters. 

[82] 


THE  GROWTH  OF  FIRE  PREVENTION 

In  reviewing  the  fire-prevention  activities  of  the 
period,  it  must  not  be  assumed  to  have  been  the  only 
topic  of  consideration.  There  was  merely  an  added 
emphasis  given  to  this  line  of  thought  and  discussion, 
and  underwriters  by  no  means  ceased  to  be  under- 
writers upon  the  more  technical  sides  of  their  busi- 
ness. Presidents'  addresses  and  committee  reports 
still  bristled,  as  of  yore,  with  facts  and  figures  on  rates, 
dividends,  policy-forms,  legislation,  taxation,  adjust- 
ments, and  many  other  subjects.  President  Skilton 
was  succeeded  by  E.  A.  Walton,  of  the  Citizens'  In- 
surance Company  (of  New  York),  and  the  board 
membership  grew  steadily,  reaching  one  hundred  and 
four  companies  in  1896;  once  again  it  could  claim  to 
stand  for  the  weight  and  influence  of  the  entire  pro- 
fession. Ex-President  Baker  had  gone  to  his  reward, 
but  his  prophecy  "Resurgam"  had  been  amply  ful- 
filled. 


[83] 


IX 

THE  NATIONAL  BOARD  AS  A  BALANCE  WHEEL 
(1897-1899) 

IN  1899,  there  came  an  opportunity  to  prove  that 
an  organization  without  legislative  powers  could 
still  be  virile  and  effective  in  the  matter  of  rates. 
When  the  National  Board  had  abandoned  rate-mak- 
ing twenty  years  earlier,  this  function  had  devolved 
on  various  local  organizations  and  one  of  these,  the 
New  York  City  Tariff  Association,  had  broken  down 
under  a  severe  outbreak  of  local  rate-cutting.  Hu- 
man nature  flamed  up  in  all  its  old-time  ardor  of 
combat,  and  the  war  cut  millions  of  dollars  from 
premium  receipts  in  the  metropolis.  Worse  than 
this,  it  threatened  to  spread  to  other  boards  and  to 
draw  the  whole  country  into  the  maelstrom  of  dis- 
order. Fire  insurance  had  become  an  institution  of 
such  huge  proportions  that  its  general  demoralization 
would  be  a  matter  of  national  moment.  It  was  the 
dangerous  strife  of  giants. 

At  this  moment,  the  president  of  the  National 
Board  issued  a  call  for  a  conference  which  resulted 
in  the  formation  of  the  New  York  Fire  Insurance 
Exchange,  and  this  new  body  proceeded  to  reestab- 
lish sound  practise  and  tranquillize  the  situation. 

[84] 


NATIONAL  BOARD  AS  A  BALANCE  WHEEL 

Under  the  old  autocratic  rule,  the  board  would  have 
made  a  national  issue  of  the  local  conflict  by  at- 
tempted coercion;  in  its  new  role,  it  exerted  the 
powerful  influence  of  moral  suasion  and  prevented 
the  issue  from  becoming  national.  Apparently,  the 
board  was  learning  strife  prevention  as  well  as  fire 
prevention. 

This  incident  occurred  under  the  administration  of 
President  Irvin,  of  the  Fire  Association,  of  Philadel- 
phia. His  second  predecessor,  William  B.  Clark,  of 
the  iEtna,  had  stated  that  the  board,  in  relinquishing 
its  legislative  powers,  had  "placed  itself  on  a  higher 
plane"  and  had  "increased  its  influence  in  other  direc- 
tions." This  point  he  had  demonstrated  in  many 
ways,  including  efforts  with  the  Governors  of  all  the 
states  in  behalf  of  fire-waste  legislation.  The  new, 
old  National  Board  was  no  longer  a  Machine  but  an 
Influence. 

It  was  also  during  the  administration  of  Mr.  Clark 
that  the  board  made  an  important  definition  of  its 
position  upon  the  subject  of  foreign  companies. 
This  was  at  the  May,  1 897,  meeting.  The  Committee 
on  Legislation  and  Taxation  had  just  made  a  report 
in  which  it  expressed  disapproval  of  the  fact  that 
several  states  were  showing  a  disposition  to  levy 
larger  taxes  upon  foreign  companies  than  upon  those 
of  America.  It  was  pointed  out,  in  the  report,  that 
this  was  unjust  to  the  foreign  capital  that  shared  the 
risk  of  protecting  American  property,  and  that  it  was 
a  dangerous  precedent  which,  in  time,  might  lead  to 

[85] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

discrimination  by  one  state  against  the  companies  of 
another.  A  warm  debate  followed.  A  small  but  de- 
termined minority  held  that  foreign  capital  should  be 
discouraged,  but  the  broader  view  prevailed  by  an 
overwhelming  majority,  and  the  committee's  report 
was  sustained.  As  if  to  emphasize  the  thought  of 
international  comity,  the  Nominating  Committee 
brought  in  the  name  of  Henry  W.  Eaton,  of  the  Liver- 
pool, London  and  Globe  Insurance  Company,  and  he 
became  the  first  president  chosen  from  a  foreign  com- 
pany. Thus  again  was  the  harmonizing  spirit  domi- 
nant in  board  affairs ;  the  board  definitely  had  "placed 
itself  upon  a  higher  plane." 


[86] 


X 

AN  ENLARGEMENT  OF  ENGINEERING  ACTIVITIES 
(1899- 1 903) 

WHILE  these  events  were  in  progress,  sacri- 
fices to  the  God  of  Fire  in  America  grew 
always  more  and  more  enormous.  If 
alarm  had  been  felt  when  the  aggregate  loss  reached 
$43,000,000  in  1865,  how  shall  the  feeling  be  de- 
scribed when,  in  1899,  this  figure  exceeded  $153,000,- 
000,  in  spite  of  all  insurance  efforts  at  fire  prevention? 
The  companies  were  stronger  and  better  organized 
than  ever  before,  but  the  magnitude  of  the  losses 
might  well  cause  dismay. 

In  seeking  for  new  methods  of  necessary  readjust- 
ment to  these  conditions  there  was  a  brief  period  of 
attention  given  to  an  old  idea.  It  seemed  to  some  that 
the  time  was  favorable  for  the  reassertion  of  control 
over  rates  and  commissions,  and  a  Committee  of 
Twenty-seven  (the  profession  has  always  been  ad- 
dicted to  numerical  committees)  was  appointed  to 
consider  the  subject.  The  committee  called  a  con- 
vention of  companies  on  June  21,  1900,  and  submitted 
a  carefully  prepared  compact,  "The  Agreement  of 
1900";  it  was  authorized  to  procure  signatures  of 
assent,  but  failed,  and  the  Agreement  never  became 

[87] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

an  agreement,  although  a  second  convention  was  held 
and  a  modified  form  of  compact  attempted.  The  old 
idea  had  gone  out  from  the  national  field. 

Closer  to  the  spirit  of  the  age  was  an  intensified 
fight  against  fire.  To  this  end,  a  highly  important 
line  of  work  was  now  inaugurated.  Fire-loss  figures 
had  proved  that  fire-prevention  work  undertaken 
spasmodically  was  of  little  avail ;  there  must  be  a  sys- 
tematic and  organized  action.  For  this  purpose, 
uniform  rules  in  regard  to  devices  and  materials  enter- 
ing into  fire  hazard  were  necessary  and  precise  knowl- 
edge must  be  substituted  for  guesswork.  The  Execu- 
tive Committee  called  representatives  of  the  various 
underwriting  organizations  together,  and,  after  many 
conferences,  a  plan  for  a  Board  of  Consulting  En- 
gineers was  evolved.  To  this  board  should  be  re- 
ferred fire-hazard  questions;  it  should  make  tests, 
''when  practicable,"  of  various  appliances,  and  its 
actions,  when  approved  by  the  Executive  Committee, 
should  be  advocated  by  the  members  of  the  National 
Board.  The  seed  thus  planted,  on  December  28, 
1899,  grew  in  time  to  large  proportions,  as  will  appear 
in  later  chapters. 

Another  of  the  far-reaching  developments  of  the 
period  was  the  decision  to  assume  the  expense  of 
printing  and  circulating  descriptions  of  the  standards 
formulated  by  the  National  Fire  Protection  Associa- 
tion. This  association,  of  which  more  anon,  had  been 
organized  in  1896,  largely  through  the  instrumental- 
ity of  the  National  Board.     It  was  now  engaged  in  a 

[88] 


ENLARGEMENT  OF  ENGINEERING  ACTIVITIES 

scientific  study  of  standards  for  automatic  sprinklers, 
fire-extinguishers,  fire-proof  doors  and  other  fire-re- 
sisting devices,  and  it  was  doing  excellent  work.  The 
board  made  an  initial  appropriation  of  a  thousand 
dollars  for  printing  the  results  of  these  labors. 

Much  of  the  interest  of  the  time  continued  to  be 
focused  upon  the  relation  of  electricity  to  the  origin 
of  fires.  This  great  antagonist  of  the  insurance  com- 
panies was  no  longer  a  mystery,  its  laws  were  being 
discovered  and  its  myriad  methods  of  attack  were, 
being  carefully  noted.  More  and  more  it  was  com- 
ing to  be  realized  that  the  electric  current  was  one  of 
the  chief  factors  in  the  country's  tremendous  fire-loss. 
As  its  use  was  broadening,  the  hazard  was  increasing 
from  day  to  day.  A  few  typical  cases  taken  at  ran- 
dom from  the  hundreds  in  the  Electrical  Bureau's 
reports  will  show  the  universal  and  many-featured 
nature  of  the  peril: 

Ignition  of  Escaping  Gas  by  an  Electric  Arc. 
A  building  which  had  been  undergoing  repairs  collapsed 
at  two  A.  M.  The  chief  of  the  Fire  Department  arrived 
promptly  and  telephoned  to  the  various  electric-light  com- 
panies to  shut  off  the  current.  Within  twenty-five 
minutes  all  the  electric  companies  with  one  exception  had 
complied.  After  one  hour  and  eight  minutes,  a  fire  broke 
out  in  the  ruins,  causing  a  serious  loss.  The  cause  of  the 
fire  was  undoubtedly  the  ignition  by  electric-light  wires  of 
escaping  gas  which  had  permeated  the  ruins.  The  loss 
was  estimated  at  $130,000. 

[89] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Two  Electric  Flatirons  Left  in  Circuit  became 
overheated  and  set  fire  to  tables,  boxes,  and  piece-goods 
of  a  tailoring  establishment  located  in  the  basement  of  a 
building.  The  fire-proof  construction  of  the  building 
prevented  what  might  have  been  a  serious  loss,  as  the  fire 
occurred  about  midnight  ivhen  no  occupants  were  about. 

Blowing  of  a  Fuse  in  an  open  fuse-block  installed  in 
a  cotton-mill  threw  molten  metal  into  some  bagging  near 
by,  causing  it  to  ignite  and  set  fire  to  the  mill.  The  insur- 
ance loss  was  $3,805.09. 

Broken  Incandescent  Lamp-base.  A  window- 
trimmer  arranged  an  elaborate  display  of  incandescent 
lamps  in  the  midst  of  some  inflammable  merchandise  and 
failed  to  notice  that  one  of  the  lamps  had  become  broken. 
The  trimmings  having  been  completed,  the  lights  were 
turned  on,  and  a  flash  of  fire  took  place  among  the  dainty 
fabrics.   .   .  .  The  loss  was  $1,500. 

A  Contact  Between  Trolley  and  Telephone- 
Wires  was  produced  by  the  jumping  of  the  trolley  wheel 
of  an  electric  car  from  its  own  wire.  A  heavy  current 
was  conducted  to  two  telephones,  causing  their  destruction 
and  starting  fires  in  both  places. 

Sparks  Due  to  Quick  Reversal  of  a  Motor  Used 
for  Operating  an  Elevator  set  fire  to  sawdust  which 
had  been  placed  under  the  armature  bearing  to  soak  up 
the  oil. 

This  list  might  be  indefinitely  extended.  The 
widely  diversified  uses  of  electricity  and  the  fact  that 
it  often  operated  behind  walls  or  under  floors  made 

[90] 


ENLARGEMENT  OF  ENGINEERING  ACTIVITIES 

this  Protean  fire-peril  one  of  the  most  serious  subjects 
for  underwriters  to  consider.  One  of  the  insurance 
journals  published  a  table  of  electrical  fire  statistics 
showing  an  increase  from  one  hundred  and  twenty- 
one  fires,  with  a  loss  of  $1,245,971,  in  1890,  to  seven 
hundred  and  fifty  fires,  with  a  loss  of  $6,428,815,  in 
1900.  These  figures  were  far  short  of  being  exact, 
for  the  Electrical  Bureau  gave  a  list  of  2,650  such 
fires  for  the  year  ending  April  10,  1900,  and  the  Com- 
mittee on  Lighting,  Heating,  and  Patents  estimated 
the  number  of  those  causing  losses  of  less  than  a  thou- 
sand dollars  each,  as  about  eight  thousand.  In  ad- 
dition to  the  known  cases,  some  of  the  largest  fires 
were  under  unproved  suspicion — fires  so  frequently 
consume  all  evidence  of  their  origin — as  having  been 
due  to  the  same  cause.  It  was  evident  that  electricity, 
mankind's  new  servant,  was  costing  the  insurance 
companies  many  millions  of  dollars  a  year.  It  also 
was  costing  the  public  large  loss  in  life  and  property, 
but  the  underwriters,  as  now  was  becoming  habitual 
with  them,  were  the  ones  to  lead  in  defensive  meas- 
ures. 

This  phase  of  the  work  broadened  rapidly.  Addi- 
tional appropriation  was  made  and  additional  experts 
were  employed.  The  National  Elecrical  Code  was 
revised,  and  thirty  thousand  copies  were  circulated 
through  the  various  underwriting  associations  of  the 
country.  A  campaign  was  undertaken  for  the  pur- 
pose of  securing  the  adoption  of  this  code  by  cities  and 
towns,  and  by  April  24,  1901,  it  was  being  enforced 

[91I 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

by  one  hundred  and  twenty-five  municipal  govern- 
ments. But  perhaps  the  most  far-reaching  engineer- 
ing development  of  this  period  was  the  organization, 
in  November,  1901,  of  the  Underwriters  Labora- 
tories, Inc.,  a  remarkable  institution,  the  story  of 
whose  achievements  will  be  reserved  for  a  later 
chapter. 

In  the  mean  time,  the  organic  life  of  the  National 
Board  was  proceeding  in  a  healthy  manner.  Presi- 
dent Irvin  was  succeeded  by  George  P.  Sheldon,  of 
the  Phenix  Insurance  Company,  and  he,  in  turn,  by 
Robert  B.  Beath,  of  the  United  Firemen's  Insurance 
Company.  In  1903,  Henry  H.  Hall,  of  four  com- 
panies (the  Union  Assurance  Society  and  the  Law, 
Union  and  Crown,  both  of  London;  the  State,  of 
Liverpool,  and  the  Victoria,  of  New  York),  was 
called  to  the  presidential  chair.  Short  terms  had 
become  the  accepted  custom,  in  contrast  to  one  ten- 
year  term  in  the  period  of  stagnation,  and  the  presi- 
dency of  the  National  Board  was  universally  regarded 
as  the  highest  honor  in  the  fire-insurance  profession. 
By  1901,  the  membership  had  mounted  to  one  hun- 
dred and  twenty-nine  companies — more  than  five 
times  the  number  that  had  been  enrolled  a  brief  thir- 
teen years  before. 

In  the  same  year,  the  board  did  a  piece  of  long- 
neglected  pruning  in  the  statement  of  purposes  in  its 
constitution;  it  cut  out  two  dead  and  withered 
branches  which  once  were  its  pride;  viz.:  "to  estab- 
lish and  maintain  as  far  as  practicable  a  system  of 

[92] 


HEXRV  \V.   EATON 

Liverpool  and  London  and  Globe  Insur- 
ance Company,  of  luigland.  President, 
1897    to    1898. 


E.   C.   IR\L\ 

Fire  Association,  of  Philadelphia.    Presi- 
dent,   1S98    to    1900. 


GEORGE  P.   SHELDON 

Phenix    Insurance    Company,    of    Brook- 
lyn.     President,    1900    to    1902. 


ROBERT  B.   BEATH 

United    Firemen's    Insurance    Company, 
of      Philadelphia.        President,      1902     to 


HENRY  H.  HALL  JOHN  H.  WASHBURN 

Union   Assurance    Company,  of   London.         Home      Insurance     Company,     of     Xew 
President,    1903   to    1904.  York.      President,    1904   to    1906. 


GEORGE  W.  BURCHELL  J.  MONTGOMERY'  HARE 

Queen     Insurance     Company,     of     New         Norwich    Union   Fire   Insurance   Society, 
York.      President,    1906   to    1908.  of    England.      President,    1908   to    1910. 


ENLARGEMENT  OF  ENGINEERING  ACTIVITIES 

uniform  rates  of  premium,"  and  "to  organize  and  sus- 
tain local  boards  of  fire  underwriters." 

In  no  way  can  the  change  in  the  spirit  of  board 
afifairs  be  better  appreciated  than  by  comparing  the 
"statement  of  purposes"  which  closes  the  first  chapter 
with  those  which  successive  modifications  had  now 
brought  to  pass.     These  were: 

1.  To  promote  harmony,  correct  practises,  and  the 
principles  of  sound  underwriting.  To  devise  and  give 
effect  to  measures  for  the  protection  of  the  common  inter- 
ests, and  the  promotion  of  such  laws  and  regulations  as 
will  secure  stability  and  solidity  to  capital  employed  in  the 
business  of  fire  insurance,  and  protect  it  against  oppres- 
sive, unjust,  and  discriminative  legislation. 

2.  To  repress  incendiarism  and  arson  by  combining  In 
suitable  measures  for  the  apprehension,  conviction,  and 
punishment  of  criminals  guilty  of  that  crime. 

3.  To  gather  such  statistics  and  establish  such  classifi- 
cation of  hazards  as  may  be  for  the  Interest  of  members. 

4.  To  secure  the  adoption  of  uniform  and  correct 
policy-forms  and  clauses  and  to  endeavor  to  agree  upon 
such  rules  and  regulations  In  reference  to  the  adjustment 
of  losses  as  may  be  desirable  and  In  the  Interest  of  all 
concerned. 

5.  To  Influence  the  Introduction  of  Improved  and  safe 
methods  of  Building  construction,  encourage  the  adoption 
of  fire-protective  measures,  secure  efficient  organization 
and  equipment  of  Fire  Departments,  with  adequate  and 
Improved  water-systems,  and  establish  rules  designed  to 

[93] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

regulate  all  hazards  constituting  a  menace  to  the  business. 
Every  member  shall  be  bound  in  honor  to  cooperate  with 
every  other  member  to  accomplish  the  desired  objects  and 
purposes  of  the  board. 

Paragraph  5  would  never  have  entered  the  con- 
sciousness of  one  of  the  constitution  makers  of  1866, 
at  least  it  seems  to  have  occurred  to  no  one.  In  those 
days,  the  business  of  underwriters  was  underwriting 
— neither  more  nor  less. 


[94] 


XI 

BALTIMORE  AND  SAN  FRANCISCO 
(1904- I 906) 

OUTSIDE  of  war,  the  most  dramatic  events 
of  American  life  have  been  furnished  by 
conflagrations.  By  strange  coincidence  the 
most  terrible  conflagrations  in  our  history  have  ap- 
peared in  groups;  the  Chicago  and  Boston  fires,  in 
1 87 1  and  1872,  and  the  fateful  years  of  1904  and  1906, 
when  Baltimore,  Toronto,  Rochester,  and  Yazoo 
City  all  suffered  disastrous  fires,  and  the  greatest  fire 
catastrophe  of  history  caused  a  large  portion  of  San 
Francisco  to  go  up  in  smoke. 

On  February  7,  1904,  the  nation  received  a  shock 
such  as  It  had  not  known  in  thirty-two  years.  A  fierce 
blaze  developed  in  the  most  substantial  section  of  the 
city  of  Baltimore  and,  driven  by  the  high  wind  which 
naturally  causes  conflagrations  to  spread,  it  swept 
over  many  blocks  of  the  city's  finest  business  build- 
ings. The  total  loss  reached  $50,000,000,  of  which 
some  $30,000,000  fell  upon  the  insurance  companies. 
This  loss,  added  to  the  heavily  increasing  totals  of 
the  preceding  years,  was  sufficiently  startling,  but 
what  caused  especial  dismay  was  the  evidence  that 
some  supposedly  fire-proof  forms  of  construction 
could  not  stand  the  test  of  a  great  fire. 

[95] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

American  life  was  steadily  tending  toward  con- 
gestion in  cities  where  single  buildings  often  rep- 
resented values  equal  to  those  of  small  towns. 
Concentration  of  wealth  meant  concentration  of  risk, 
each  citizen  being  imperiled  by  carelessness  or  acci- 
dent among  an  indefinite  number  of  neighbors.  It 
had  been  generally  assumed  that  modern  construc- 
tion and  modern  fire-fighting  had  largely  obviated 
this  peril;  now  it  was  seen  that  this  belief  was  mis- 
taken. If  substantial,  well-built  Baltimore  could  be 
laid  waste,  wherein  lay  safety?  As  if  to  emphasize 
the  lesson,  ten  weeks  later  the  city  of  Toronto  was 
subjected  to  a  $12,000,000  conflagration. 

The  annual  meeting  of  the  National  Board  in 
May  found  the  underwriters  fully  alive  to  the  situa- 
tion. Reports  were  read  by  several  engineers  who 
had  made  expert  investigations  on  the  ground,  but 
the  predominant  question  was  that  of  the  future. 
One  of  the  experts  had  stated  that  "nothing  hap- 
pened at  Baltimore  that  might  not  have  been  fore- 
told by  a  study  of  the  fire  records  of  the  past" — how, 
then,  should  other  conflagrations  be  guarded  against? 
To  this  end  a  Committee  of  Twenty  already  had 
been  appointed  by  the  Executive  Committee.  Its 
twenty  members  included  some  of  the  strongest  men 
in  the  profession ;  they  were  specifically  charged  to 
define  the  boundaries  of  congested  districts  in  all  the 
cities,  to  study  the  dangers  of  conflagration,  and  to 
prepare  an  insurance  schedule  to  correspond.  It 
was  an  extensive  program,  but  the  need  was  urgent; 

[96] 


BALTIMORE  AND  SAN  FRANCISCO 

the  committee  was  authorized  to  employ  whatever 
assistance  might  be  deemed  necessary. 

By  May,  1906,  it  was  able  to  make  an  impressive 
report;  conditions  had  been  minutely  studied  in 
fifty-five  large  cities  with  a  wonderful  increase  of 
knowledge.  The  work  had  taken  the  time  of  many 
engineers  and  had  cost  the  companies  $183,635. 
Most  important  of  all,  the  committee's  recommenda- 
tions regarding  water-supplies,  fire  departments, 
and  fire-alarms  had  been  widely  adopted  by  the  in- 
spected cities.  Forty-two  municipalities  had  been 
stimulated  into  spending  an  aggregate  of  more  than 
$37,000,000  to  guard  against  conflagration ;  they  had 
been  convinced  that  an  ounce  of  prevention  may  be  a 
wise  investment.  It  is  a  coincidence  that  San  Fran- 
cisco was  not  one  of  the  forty-two.  It  is  also  a 
coincidence — a  solemn  one — that  the  report  of  the 
Committee  of  Twenty,  upon  its  inspection  of  the 
Coast  metropolis,  contained  these  words: 

While  two  of  the  five  sections  into  which  the  congested- 
value  district  is  divided  involve  only  a  mild  conflagration 
hazard  within  their  own  limits,  they  are  badly  exposed  by 
the  others,  in  which  all  the  elements  of  the  conflagration 
hazard  are  present  to  a  marked  degree.  Not  only  is  the 
hazard  extreme  within  the  congested  value  district,  but  it 
is  augmented  by  the  presence  of  a  surrounding  compact, 
great-height,  large-area,  frame-residence  district  itself  un- 
manageable from  a  fire-fighting  standpoint  by  reason  of 
adverse  conditions  Introduced  by  topography. 

[97] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

In  fact,  San  Francisco  has  violated  all  underwriting 
traditions  and  precedents  by  not  burning  up;  that  it  has 
not  done  so  is  largely  due  to  the  vigilance  of  the  fire  de- 
partment, which  cannot  be  relied  upon  indefinitely  to  stave 
off  the  inevitable. 

This  was  in  October,  1905;  six  months  later,  San 
Francisco  had  ceased  to  "violate  underwriting  tra- 
ditions." 

The  afternoon  papers  of  April  18,  1906,  an- 
nounced to  a  startled  world  that  there  had  been  an 
earthquake  in  San  Francisco;  later  editions  contained 
the  supplementary  news  that  fires  had  broken  out  at 
many  points,  not  less  than  fifty  having  appeared 
within  the  first  three  hours.  By  the  following  morn- 
ing, all  thought  of  the  earthquake  was  overshadowed 
by  despatches  conveying  the  news  that  large  sections 
of  the  city  had  become  roaring  furnaces  of  flame, 
whose  progress  it  seemed  impossible  to  stay.  The 
Fire  Department  had  responded  promptly  and  had 
worked  with  desperation,  but  the  water-mains, 
broken  by  the  earthquake,  had  yielded  little  supply. 
With  the  aid  of  the  police,  of  troops  from  the  army 
reservation,  and  of  thousands  of  citizens,  the  depart- 
ment had  battled  for  three  days  and  part  of  a  fourth, 
making  an  unprecedented  use  of  explosives,  but  a 
city  which  was  90  per  cent,  built  of  wooden  build- 
ings offered  ideal  conditions  for  the  spread  of  the 
flames.  Even  when  the  fire  reached  the  district  of 
the  finest  business  blocks,  its  extraordinary  intensity 

[98] 


BALTIMORE  AND  SAN  FRANCISCO 

caused  it  to  do  enormous  damage.  As  in  the  case  of 
Baltimore,  supposedly  fire-proof  structures  suffered 
heavy  loss ;  many  of  these  survived  as  buildings,  but 
in  uninhabitable  condition  and  with  the  loss  of  their 
contents. 

When  a  drenching  rain  upon  the  fourth  day  ex- 
tinguished the  remaining  embers,  it  was  found  that 
the  flames  had  devastated  2,831  acres,  five  hundred 
and  twenty  blocks,  containing  twenty-five  thousand 
buildings  and  including  the  finest  portions  of  the 
city.  A  large  part  of  the  population  was  homeless; 
the  loss  of  life  had  been  heavy,  and  the  property  loss 
reached  the  staggering  total  of  $350,000,000.  Thus 
had  occurred  the  greatest  conflagration  of  history  in 
swift  and  conclusive  verification  of  the  warning 
given  by  the  National  Board  engineers. 

The  United  States  Geological  Survey,  in  its  study 
of  the  disaster,  quoted  this  warning,  and  continued: 

The  fire  which  has  practically  destroyed  San  Francisco 
has  more  than  fulfilled  this  prophecy.  The  destruction 
was  greater  than  in  the  Baltimore  fire,  because  the  fire  was 
hotter,  owing,  as  has  been  pointed  out,  to  the  Inflammable 
surroundings  and  the  unprotected  openings  and  to  the  un- 
checked sway  of  the  flames.  The  heat  was  so  Intense  that 
sash-welghts  and  glass  melted  and  ran  together  freely. 
In  some  places  the  edges  of  broken  cast-Iron  columns  soft- 
ened, the  tin  coating  In  piles  of  tinned  plate  volatilized, 
even  In  the  middle  of  the  piles,  and  nails  were  softened 
sufficiently  to  weld  together.     The   maximum  tempera- 

[99] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ture,  lasting  for  a  few  minutes  in  each  locality,  was  prob- 
ably 2000°  or  2200°  F.,  while  the  average  temperature 
did  not  exceed  1500°  F. 

So  overwhelming  was  the  disaster,  that  all  parts  of 
the  world  sent  contributions  to  relieve  the  distress, 
but  it  was,  of  course,  to  the  insurance  companies  that 
the  stricken  city  looked  most  expectantly,  as  did  Chi- 
cago, in  1 871.  The  great  development  of  the  insur- 
ance business  was  now  made  plain.  The  Chicago 
fire  had  wrecked  more  than  fifty  of  the  joint-stock 
companies,  but  San  Francisco's  catastrophe,  with  a 
loss  "amounting  to  a  sum  as  large  as  the  aggregate 
of  all  the  great  conflagrations  in  the  United  States 
for  the  last  fifty  years,"  caused  the  suspension  of  only 
twenty,  and  a  number  of  these  afterward  resumed. 
Nearly  all  of  the  companies  made  haste  to  pay  their 
claims.  The  magnitude  of  this  undertaking  appears 
from  the  fact  that  there  were  one  hundred  and  fifty 
thousand  claims,  affecting  two  hundred  and  forty- 
three  companies  and  involving,  including  foreign 
reinsurance,  about  $220,000,000.  A  vast  sum  began 
to  pour  into  San  Francisco  in  a  golden  flood,  and  in 
an  incredibly  short  time  the  work  of  reconstruction 
was  begun.  To-day  the  recreated  city  shows  few 
traces  of  its  disaster.  Never  had  fire  insurance  been 
put  to  so  severe  a  test,  and  never  had  it  made  so  suc- 
cessful a  showing. 

Nevertheless,  insurance  capital  had  suffered  se- 
verely.    In  the  National  Board  meeting  for  May, 

[100] 


BALTIMORE  AND  SAN  FRANCISCO 

1907,  President  Burchell  made  an  astounding  state- 
ment: 

Your  committee  on  statistics  will  present  figures  in 
proof  of  the  statement  that  this  single  conflagration  swept 
away  not  only  every  dollar  of  profit,  made  by  the  compa- 
nies out  of  underwriting  since  i860,  which  is  as  far  back 
as  the  National  Board  tables  go,  but  cost  them  besides, 
$yg,'jo8,i14  for  the  period. 

In  other  words,  considering  underwriting  by  itself 
with  no  reference  to  income  from  investments,  the 
business  showed  a  net  loss  of  nearly  eighty  million 
dollars  during  forty-seven  years!  Incidentally, 
nearly  one  thousand  stock  fire-insurance  companies 
had  failed  in  that  period. 

The  country's  fire-loss  for  1906  totaled  $518,611,- 
800 — some  $28,000,000  in  excess  of  the  value  of  its 
entire  wheat  crop. 

Again  was  it  borne  in  upon  the  minds  of  under- 
writers and  public  alike  that  the  omnipresent  con- 
flagration hazard  is  one  of  the  greatest  perils  of 
modern  civilization.  Many  people  recalled  with  a 
shudder  New  York  city's  danger  during  the  water- 
famine  of  fifteen  years  earlier.  One  prominent  en- 
gineer who  investigated  New  York's  water  supply 
said: 

Although  I  had  long  been  familiar  in  a  general  way 
with  the  conditions  here  ...  I  had  never  realized  until 
I  got  well  along  in  that  investigation  how  near  you  came 

[lOl] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

to  the  ragged  edge  of  a  fearful  disaster  in  1891,  and  very 
few  New  Yorkers  realize  this  condition  to-day.  As  I 
platted  the  curve  of  the  lowering  of  the  reservoirs  in 
November,  1891,  I  found  it  going  down  from  day  to  day, 
until  one  reservoir  after  another  was  empty,  until  there 
was  only  forty-eight  hours'  supply  for  the  great  city  of 
New  York  in  all  its  reservoirs.  I  went  to  the  late  chief 
engineer  of  the  Croton  Aqueduct  and  said  to  him,  "Mr. 
Ftely,  did  you  recognize  this?"  "Certainly,"  he  said,  "I 
realized  it  so  thoroughly  that  I  had  engaged  quarters  for 
my  family  outside  the  city  and  was  planning  to  move  them 
away,  out  of  the  impending  disaster  on  the  same  day  that 
the  rain  happened  to  come." 

The  public  did  not  know  that.  How  many  of  the  mer- 
chants and  underwriters  realized  that  at  one  time  the 
gates  on  all  the  four-foot  mains  leading  out  from  your 
Central  Park  reservoirs  had  been  shut  down  little  by  little 
day  after  day,  trying  to  choke  off  the  pressure  and  thus 
to  check  the  consumption  of  water,  until  those  forty-eight 
gates  were  only  open  an  inch  and  a  half  at  the  bottom? 

If,  at  this  critical  moment,  the  metropolis  had 
experienced  the  combination  of  an  unmanageable 
blaze  and  a  high  wind,  there  might  have  resulted  a 
disaster  as  far  in  excess  of  that  of  San  Francisco  as 
that,  in  turn,  exceeded  the  Baltimore  fire.  Such  an 
event  almost  certainly  w^ould  have  cost  many  thou- 
sands of  lives,  would  have  wrecked  most  of  the  fire- 
insurance  companies,  and  would  have  thrown  the 
country  into  a  financial  panic  of  the  largest  propor- 

[102] 


BALTIMORE  AND  SAN  FRANCISCO 

tions.  To-day  the  underwriters  have  learned  the 
dangers  of  concentrated  hazard;  by  carefully  limit- 
ing the  amount  of  risk  that  they  will  assume  in  any 
one  place  they  protect  their  solvency,  but  many  cities 
still  live  unconsciously,  in  daily  peril,  upon  the 
brinks  of  volcanoes. 


[103] 


XII 

GRAPPLING  WITH  THE  FIRE-WASTE  PROBLEM 
(1907- I 909) 

In  conclusion  I  can  only  say  that  it  is  not  too  much  to 
expect  that  the  present  work  of  the  board  will  as  time  goes 
on  inure  to  the  great  benefit  of  those  engaged  in  the  fire- 
insurance  business,  and  more  than  this,  it  should  also 
prove  to  be  of  economic  value  to  the  country  at  large  in 
pointing  out  methods,  which,  if  followed,  will  check  at 
least  in  some  degree  the  great  fire-waste  of  the  country, 
now  become  such  a  drain  upon  its  resources,  and  consti- 
tuting, as  students  of  the  subject  have  so  often  pointed 
out,  a  loss  which  is  absolutely  irretrievable. 

IN  these  words,  President  Burchell  concluded  his 
annual  address  at  the  May,  1907,  meeting  of  the 
National  Board.  It  was  a  serious  moment  in 
American  commercial  history.  An  organization  in 
which  one  hundred  and  twelve  of  the  country's  larg- 
est financial  institutions  were  represented  by  their 
executive  officers,  a  body  which  stood  for  an  interest 
so  vast  that  but  two  or  three  in  the  nation  might  be 
compared  with  it,  solemnly  considered  the  results  of 
its  most  disastrous  year.  Never  had  there  been  such 
earnest  efforts  toward  making  conflagrations  impos- 
sible, and  never  before  had  fire  wrought  such  dis- 

[104] 


GRAPPLING  WITH  FIRE-WASTE  PROBLEM 

aster.  It  could  hardly  occasion  surprise  had  the 
entire  future  of  the  business  been  held  to  lie  in  the 
balance.  It  was  a  national  question.  Here  was  a 
single  year's  destruction  more  than  half  as  large  as 
the  entire  national  debt  and  here  was  a  body  upon 
which  had  fallen  the  chief  burden  of  compensating 
for  this  destruction.  The  question  of  survival  might 
well  have  been  deemed  to  be  at  stake. 

But  there  was  no  thought  of  non-survival  in  the 
minds  of  the  underwriters.  There  was  no  note  of 
despair  as  was  heard  after  the  Chicago  and  Boston 
fires.  There  was,  indeed,  no  lack  of  appreciation  of 
the  magnitude  of  the  disaster,  but  the  general  feeling 
seems  to  have  been  one  of  satisfaction  that  fire  insur- 
ance had  come  triumphantly  through  such  a  test,  and 
of  increased  determination  to  grapple  with  the  fire- 
waste  problem. 

It  may  be  enlightening  to  review  the  activities  of 
this  one  meeting,  and  to  contrast  them  with  the  end- 
less discussion  of  "adequate  and  inadequate  rates,"  of 
agency  commissions,  policy-forms,  and  the  disciplin- 
ing of  local  boards,  that  predominated  in  the  earlier 
days. 

First,  the  president  discussed  the  calamities  of  the 
preceding  year,  referred  briefly  to  the  work  of  the 
various  committees  and  presented  the  usual  tabu- 
lated statistics  of  the  business.  The  treasurer  re- 
ported receipts  of  $163,557.33  ^^d  expenditures  of 
$124,134.62,  leaving  a  balance  available  for  the  ac- 
counts of  Fire  Prevention,  General  Account,  Sub- 

[105] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

urban  Electrical  Inspection,  and  Arson  Fund.  The 
Executive  Committee  announced  the  removal  of 
headquarters  from  34  Nassau  Street  to  135  William 
Street  and  introduced  the  reports  of  the  ten  standing 
committees  which  represented  the  real  activities  of 
the  National  Board. 

Of  these  committees,  that  on  Finance  was  the  first; 
it  asked  for  an  appropriation  of  $100,000,  and  sug- 
gested that  an  assessment  of  one-twentieth  of  one  per 
cent,  be  levied  upon  more  than  $196,000,000  of 
premium  receipts.     This  was  voted. 

The  Committee  on  Laws  discussed  the  situation  in 
several  of  the  states  and  announced  an  "understand- 
ing that  all  state  organizations  of  local  fire-insur- 
ance agents,  before  advocating  any  measures  of 
legislation,  would  report  to  the  Committee  on  Legis- 
lation of  the  general  body,  which  committee  would 
keep  in  touch  with  the  Committee  on  Laws  of  the 
National  Board,"  thus  tending  to  unify  the  general 
policy. 

This  was  followed  by  the  report  of  the  Committee 
on  Incendiarism  and  Arson,  a  committee  whose  ac- 
tivity throughout  nearly  the  entire  history  of  the 
board  had  been  effective  in  checking  the  operations 
of  a  villainous  profession.  The  item  of  incendiary 
fires  had  always  been  a  large  one,  but  the  constant 
publication  of  rewards  offered  by  this  committee  had 
probably  prevented  enormously  larger  totals.  The 
report  announced  the  offering  of  eighty-one  new  re- 

[106] 


GRAPPLING  WITH  FIRE-WASTE  PROBLEM 

wards,  totaling  $22,800,  and  making  a  grand  total 
of  $1,876,750  in  thirty-four  years.  During  this  time 
three  hundred  and  eighty-six  convictions  had  been 
secured.  While  this  number  was  less  than  five  per 
cent,  of  the  total  number  of  arson  cases,  it  frequently 
had  been  demonstrated  that  the  publication  of  a  re- 
ward in  any  town  served  as  an  immediate  check  to 
incendiary  fires  in  that  locality. 

The  Committee  on  Statistics  and  Origin  of  Fires 
then  presented  a  detailed  analysis  of  the  year's  fire- 
statistics  in  two  hundred  and  forty-one  cities  having 
a  population  of  more  than  twenty  thousand.  These 
cities  alone  showed  a  total  of  ninety  thousand  sepa- 
rate fires,  in  addition  to  the  great  conflagration  in 
San  Francisco.  Such  figures  would  be  impossible, 
under  European  methods.  They  were  a  partial 
measure  of  the  "moral  hazard"  of  American  care- 
lessness. 

The  committee  substantiated  the  president's  state- 
ment of  the  net  loss  of  American  underwriting 
(exclusive  of  interest  on  investments)  since  i860. 
It  showed  that  the  total  premium  receipts  of  $4,292,- 
238,324,  although  a  prodigious  sum,  had  been  offset 
by  a  total  of  losses,  expenses  and  increased  liabilities 
to  the  amount  of  $4,371,946,498,  leaving  a  net  loss  of 
$79,708,174. 

The  Committee  on  Fire  Prevention,  whose  report 
followed,  was  the  result  of  consolidating  the  Com- 
mittee of  Twenty  with  the  older  Committee  on  Fire 

[107] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Departments,  Fire-Patrols  and  Water-Supply.  It 
represented  the  largest  individual  activity  and  ac- 
counted for  three-fifths  of  the  total  expense  of  the 
National  Board.  It  had  thirteen  field-engineers, 
three  office-engineers,  and  a  clerical  force  of  three. 
Far  from  being  discouraged  by  the  terrible  events  of 
the  year,  it  reported  the  inspection  of  forty  cities  and 
the  reinspection  of  twenty,  and  asked  for  $60,000  for 
the  following  year,  which  was  readily  conceded.  It 
also  announced  the  engagement  of  Wilbur  E.  Mai- 
lalieu,  of  the  Electrical  Department,  as  assistant  to 
General  Agent  Miller.  With  some  self-restraint, 
the  committee  forbore  to  mention  the  remarkable 
fulfilment  of  its  warning  in  the  case  of  San  Fran- 
cisco. No  better  justification  of  its  work  could  have 
been  conceived. 

For  many  years,  the  Committee  on  Lighting, 
Heating  and  Patents,  or  whatever  body  had  previ- 
ously concerned  itself  with  these  matters,  had  been 
the  National  Board's  special  organ  of  adaption  to 
the  changes  in  hazard  produced  by  the  progress  of 
science  and  invention.     To  quote  from  its  report: 

The  work  of  this  committee  has  been  developed  along 
several  lines,  and  it  may  again  be  stated  that  results  are 
attained  in  part  through  the  following  organizations,  all 
working  in  harmony  with  us,  for  the  purpose  of  securing 
uniform  rules  and  practises,  viz. : 

I.  The  Consulting  Engineers  who  formulate  and  sub- 
mit to  us  rules  relative  to  hazardous  devices  or  materials. 

[108] 


GRAPPLING  WITH  FIRE-WASTE  PROBLEM 

2.  The  National  Fire  Protective  Association,  from 
which  we  receive  rules  as  to  matters  of  a  protective 
nature. 

3.  The  Underwriters  National  Electrical  Association, 
to  which  is  due  the  credit  of  having  developed  the  Na- 
tional Electrical  Code. 

4.  The  Underwriters'  Laboratories  in  Chicago,  where 
tests  are  made  of  devices  and  materials  for  all  of  the 
above-named  organizations,  and 

5.  The  Electrical  Inspection  Department  of  the  Board 
having  jurisdiction  in  New  York  suburban  territory. 

The  committee  accordingly  included  reports  of 
these  several  organizations,  showing  the  details  of 
wide-spread  inspections  and  tests,  the  formulation 
of  standards  and  rules,  and  the  distribution  of  four 
hundred  thousand  copies  of  these  rules  throughout 
the  country.  The  printing  of  one  hundred  thousand 
copies  of  the  revised  Electrical  Code  was  deemed 
especially  important. 

Among  the  most  interesting  reports  was  that  of  the 
Committee  on  Construction  of  Buildings,  whose 
work  was  important  in  the  reduction  of  conflagration 
hazard.  The  committee  emphasized  the  necessity 
for  better  buildings  by  comparing  the  normal  Ameri- 
can fire-loss  of  $2  per  capita  (in  1906,  the  loss  was 
$6  per  capita)  with  the  statistics  of  six  European 
countries  showing  a  fire-loss  of  but  thirty-three  cents 
per  capita.  To  this  end,  the  committee  had  revised 
the  National  Board  Building  Code,  a  laborious  task 

[109] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

involving  a  book  of  two  hundred  and  sixty-eight 
pages,  had  sent  copies  to  the  mayors  and  fire  chiefs 
in  all  cities  of  more  than  five  thousand  population 
and  to  many  others,  and  had  sent  out  thousands  of 
letters  of  warning  and  suggestion.  Immediate  of- 
ficial action  was  urged  in  every  city. 

The  Committee  on  Clauses  and  Forms  reported 
briefly  as  to  a  reinsurance  form;  the  Membership 
Committee  announced  the  accession  of  eleven  com- 
panies, the  withdrawal  of  two,  and  the  discontinu- 
ance of  eight.  The  meeting  thereupon  concluded 
with  the  reelection  of  the  officers  of  the  preceding 
year.  It  had  been  conducted  in  a  thoroughly  earnest 
manner,  as  the  existing  serious  condition  demanded, 
but  the  note  of  discouragement  had  been  conspicu- 
ously lacking. 

This  meeting  is  fairly  representative  of  the  nature 
and  scope  of  the  National  Board's  later  activities. 
The  dominant  purpose  to  reduce  fire  waste  loomed 
large  at  this  period  and  showed  itself  in  many  ways. 
One  of  these  was  the  report  of  the  National  Con- 
servation Commission,  which  called  attention  to  the 
fact  that  the  American  fire-loss  of  1907,  with  the 
addition  of  attendant  expenses,  reached  50  per  cent, 
of  the  total  value  of  new  buildings  for  the  year  and 
was  thirteen  times  the  interest  on  total  national  debt. 
It  pointed  out  that  73  per  cent,  increase  in  popula- 
tion in  eighteen  years  had  been  attended  by  134  per 
cent,  increase  in  fire-loss,  almost  doubling  the  ratio, 
and  added: 

[no] 


GRAPPLING  WITH  FIRE-WASTE  PROBLEM 

The  time  is  past  when  the  public  can  rest  in  the  thought 
that  these  facts  concern  the  insurance  business  alone. 
The  insurance  companies,  being  simply  distributors,  can, 
and  must,  recoup  themselves  by  adequate  rates,  but  the 
damage  suffered  by  the  city,  state,  and  nation  is  irretriev- 
able. 

Especially  was  this  true  with  regard  to  the  loss  of 
life;  1,449  deaths  and  5,654  injuries  from  this  cause 
were  reported  for  the  year,  but  the  actual  number 
was  believed  to  be  at  least  twice  as  great;  this  was 
''from  five  to  seven  times  greater  than  in  Europe." 

Other  signs  of  the  times  were  to  be  found  in  the 
introduction  into  universities  and  schools  of  courses 
in  fire-protection  engineering  and  fire  insurance,  in 
conventions  of  fire  commissioners  and  fire  chiefs, 
in  the  extension  of  the  fire-marshal  system,  and  in 
action  by  the  National  Association  of  Credit  Men. 
This  powerful  body  approached  the  subject  in  a 
practical  spirit  as  is  shown  by  the  following  extract 
from  a  report  of  its  Fire  Insurance  Committee  at  the 
June,  1909,  convention: 

There  is  a  demand  also  in  every  city  that  there  be  a 
body  of  business  men  who  shall  see  to  it  that  the  recom- 
mendations made  by  the  engineers  of  the  National  Board 
of  Fire  Underwriters  for  fire  prevention  measures  .  .  . 
in  the  different  centers  shall  have  a  respectful  hearing, 
and,  so  far  as  practicable,  shall  be  adopted  and  enforced. 
Too  frequently  an  exhaustive  report  on  conditions  is 
treated  by  the  municipal  authorities  with  an  indifference 

[III] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

akin  to  contempt.  The  unwisdom  of  this  attitude  needs 
no  comment  here  and  your  committee  would  urge  that 
the  incoming  committee  make  a  study  of  the  (National) 
Board  of  Fire  Underwriters'  reports,  and,  with  the  com- 
mittee of  local  associations,  insist  that  the  fight  in  each 
municipality  be  made  on  the  basis  of  bettering  conditions, 
and  that,  too,  not  solely  with  a  view  to  securing  lower 
rates,  for  the  latter  will  follow  the  former  in  natural 
course. 

The  report  included  a  resolution  to  this  effect  and 
it  was  unanimously  adopted.  Especially  notable 
was  the  remarkable  report  of  the  U.  S.  Geological 
Survey  upon  the  fire-losses  for  1907.  With  official 
thoroughness,  this  body  had  gathered  statistics  from 
4,694  cities,  villages,  and  rural  communities,  and  had 
discovered  that  the  year's  total  of  $215,000,000  was 
almost  equally  divided  between  the  cities  and  rural 
districts;  the  population  being  also  closely  balanced 
between  the  two,  the  per-capita  loss  had  varied  but 
slightly.  This  report  repeated  the  often  expressed 
and  always  humiliating  comparison  between  Ameri- 
can and  European  figures;  it  showed  that  the  1907 
fire-tax,  the  direct  loss  plus  the  expense  of  fire  de- 
partments, net  insurance  premiums,  etc.,  cost  the 
nation  more  than  the  total  value  of  its  gold,  silver, 
copper,  and  petroleum  production  for  the  same  year, 
and  it  was  estimated  that  at  least  half  of  this  sum 
could  and  should  have  been  saved. 

The  report  further  emphasized  the  fact  that  poor 

[112] 


GRAPPLING  WITH  FIRE-WASTE  PROBLEM 

construction  was  largely  responsible  for  this  shock- 
ing condition  and  contained  this  solemn  warning  and 
statement: 

The  danger  of  conflagration  is  present  in  every  city 
and  village  of  the  United  States,  and  with  it  the  possi- 
bility of  large  loss  of  life.  The  most  efficient  fire  de- 
partment in  the  country  is  powerless  when  once  a  fire  gets 
under  considerable  headway  in  a  locality  where  bad  con- 
struction prevails. 

Most  of  these  outside  activities  were  doubtless  the 
reflex  of  the  efforts  of  the  National  Board.  Appar- 
ently the  country  was  waking  up — in  spots;  obvi- 
ously it  was  most  necessary  that  it  should. 

The  presidents  during  this  interesting  period  had 
been  John  H.  Washburn,  of  the  Home  Insurance 
Company  (elected  in  1904),  George  W.  Burchell,  of 
the  Queen  (elected  in  1906),  and  J.  Montgomery 
Hare,  of  the  Norwich  Union  (elected  in  1908). 
The  death-list  for  the  same  years  had  been  heavy, 
including  six  former  presidents,  the  first  secretary, 
Charles  B.  Whiting,  and  the  first  general  agent, 
Thomas  H.  Montgomery.  In  particular,  the  Na- 
tional Board  felt  bereavement  in  the  death,  on 
January  6,  1910,  of  General  Agent  Henry  K.  Miller, 
who  had  been  in  its  employ  for  thirty-nine  years,  of 
which  thirty-seven  were  consecutive.  It  was  freely 
acknowledged  that  much  of  the  Board's  success  had 
been  due  to  his  faithfulness  and  ability.  His  was 
the  guiding  hand  that  had  brought  it  through  many 

[113] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 


crises,  and  the  mind  that  had  shaped  its  policies. 
The  vacancy  was  filled  by  the  promotion,  on  January 
27,  1910,  of  Wilbur  E.  Mallalieu,  the  assistant  gen- 
eral agent. 


[114I 


xni 

AN  ERA  OF  LEGISLATIVE  INVESTIGATION 
(1909-1915) 

WHEN  President  Damon,  in  May,  191 1, 
called  to  order  the  forty-fifth  annual 
meeting  of  the  National  Board,  he  an- 
nounced the  beginning  of  a  new  period,  the  full 
subsequent  extent  of  which  could  not  then  be  ap- 
preciated, by  saying:  "There  has  been  no  other  year 
in  the  history  of  fire  insurance  when  it,  as  a  profes- 
sion, has  been  so  subjected  to  the  scrutiny  of  those 
who  sought  to  criticize  and  condemn  its  operations." 

There  are  few  phenomena  more  interesting  than 
the  tendency  of  events  to  group  themselves.  This 
already  has  been  noted  in  the  conflagration  period  of 
1904-08;  the  tendency  manifested  itself  anew  in 
the  era  of  legislative  investigations,  1909-15,  when 
the  states  of  Illinois,  New  York,  Pennsylvania, 
Missouri,  Wisconsin,  North  Carolina,  Kentucky, 
Ohio  and  New  Jersey  undertook  separate  probes  into 
fire-insurance  operations. 

The  average  legislator  is  an  investigation  "fan"; 
if  he  is  fortunate  enough  to  sit  on  a  committee  for 
this  purpose,  he  can  experience  the  sensations  of  a 
big-game  hunter,  while  escaping  the  hardships  of  the 

[115] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

chase.  The  years  1909-15  were  an  open  season  for 
the  pursuit  of  fire  insurance  companies.  To  appre- 
ciate the  analogy,  it  must  be  remembered  that  the 
committees  purposely  "went  gunning";  their  inves- 
tigations were  undertaken  from  an  impulse  born  of 
unconcealed  hostility.  In  spite  of  this,  most  of  the 
inquisitors  proved  to  be  men  of  reasonably  open 
minds.  Expecting  to  convict,  they  were  none  the 
less  open  to  conviction. 

The  general  subject  of  the  relations  of  fire  insur- 
ance to  the  governments  of  the  various  states  will  be 
considered  more  fully  in  a  later  chapter.  This  had 
been  a  matter  of  constant  concern  and  discussion  from 
the  earliest  days  of  the  National  Board.  In  1865, 
the  year  before  the  board  was  organized,  a  conven- 
tion had  been  held  for  the  express  purpose  of  seeking 
to  bring  about  permanent  Federal  legislation  in  order 
that  the  companies  might  not  be  harassed  by  the  con- 
stant diversities  of  unstable  state  laws.  As  already 
has  been  stated,  these  efforts  came  to  nothing,  al- 
though the  attempt  was  many  times  renewed. 

Meanwhile,  the  legislatures  of  all  the  states  con- 
stituted three  or  four  dozen  legislative  mills,  tire- 
lessly fed  with  bills  by  legions  of  millers  whose  ranks 
were  continually  renewed.  Fire  insurance  came  in 
for  unremitting  attention;  indeed,  it  seemed,  at 
times,  to  the  apprehensive  underwriters  that  many 
states  were  considering  little  else.  The  facts  that  the 
business  was  really  a  profession  of  infinite  complica- 
tion, and  that  few  among  the  thousands  of  legislators 

[116] 


ALOXZO  \V.  DAMOX 

Springlield  Fire  and  Marine  Insurance 
Company,  of  Springfield.  President. 
1910    to    191 1. 


GEORGE  W".   BABB 

Xorthern    Assurance    Companj',    of   Lon- 
don.      President,     igii    to    191.S. 


WILLIAM   X.   KREMER 

German    American    Insurance    Company, 
of  Xew  York.      President,    19 13  to    19 15. 


ELLIS  G.   RICHARDS 

Nortli  British  and  Mercantile  Insurance 
Company,  of  London  and  Edinburgh. 
President,     1915    to     iqi6. 


CHARLES  B.  WHITING 
Secretary,    1867  to   1869. 


THOMAS  H.  MONTGOMERY 
General    Agent,    1872    to    1878. 


HEXRV  K.  MILLER 
Secretary    of    the    Executive    Committee, 
1873    to    1910.     General   Agent,    1899    to 
1910. 


WILBUR  E.  MALLALIEU 
Electrical    Bureau,    1900    to    1906.     Asst. 
to  Gen.  Agent,   1906  to  1909.    Asst.  Gen. 
Agent,    1909  to    1 910.     Gen.   Agent,    19 10 
to    1913.     General    Manager.    1913. 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

possessed  more  than  a  layman's  knowledge,  did  not 
lessen  the  light-hearted  zeal  with  which  they  under- 
took to  solve  its  problems  out  of  hand.  A  high  point 
of  interference  (although  since  exceeded)  was 
reached  in  19 12,  when,  in  the  words  of  President 
Babb: 

Forty-one  states  had  sessions  of  their  legislatures  .  .  . 
and  more  measures  for  the  regulation  of  the  fire-insurance 
business  were  introduced  than  in  any  previous  year. 
The  number  of  such  bills  introduced  is  said  to  be  about 
fifteen  hundred.  It  would  seem  that  all  conceivable 
measures  of  a  hostile  and  pernicious  character  were 
among  the  number,  and,  unfortunately,  some  of  them 
were  enacted.  There  are  several  fatuous  ideas  which 
some  legislators  appear  to  harbor.  One  Is  that  fire-insur- 
ance companies  can  be  compelled  by  law  to  do  business  at 
a  loss.  .  .  .  Another  is  that  the  usual  contract  conditions 
in  general  use  for  generations  can  be  eliminated  without 
Increasing  the  fire-loss  and  without  increasing  the  cost  of 
insurance  to  the  great  majority  who  do  not  have  fires. 
...  A  third  fatuous  Idea  Is  that  taxes  in  various  forms 
can  be  piled  on  progressively  without  eventually  affecting 
the  rate  of  premium. 

It  was  indeed  a  period  of  general  atmospheric  dis- 
turbance; every  underwriter  kept  one  eye  on  his 
cyclone-cellar.  As  already  stated,  the  state  investi- 
gations had  not  been  conceived  or  conducted  in  a 
friendly  spirit;  they  were  evidences  of  "low  barome- 
ter."    All  of  which  constitutes  a  mixture  of  meta- 

[117] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

phors  fairly  descriptive  of  the  confused  state  of  mind 
among  insurance  men. 

Illinois  was  first  in  the  field.  Its  legislative  in- 
vestigators held  fifteen  sessions,  beginning  on  April 
26,  1909,  and  examined  eighty  vs^itnesses.  Their  con- 
clusions were  embodied  in  a  lucidly  written  report 
which  reviewed  the  general  insurance  situation, 
weighed  the  evidence  with  care,  and  reached  con- 
clusions very  different  from  those  which  appear  to 
have  been  desired  by  the  more  radical  legislators. 
This  may  be  inferred  from  the  action  of  the  legisla- 
ture in  ordering  a  second  investigation  two  years 
later. 

In  the  first  report,  the  Illinois  Fire  Insurance 
Commission  makes  some  interesting  points.  It 
recognizes  that 

The  business  of  fire  insurance  Is  of  such  commercial 
importance  that  it  ranks  with  banking,  railway,  express, 
and  telegraph  service,  and  public  Interests  demand  that 
any  legislation  proposed  should  preserve  the  institution 
and  Increase  Its  usefulness  rather  than  Impair  Its  capacity 
for  efficient  public  service. 

In  another  place  the  report  observes: 

It  has  come  to  be  generally  conceded  that  fire-indemnity 
is  not  merchandise  to  be  bought  and  sold  in  the  open  mar- 
ket, as  flour  or  lumber,  subject  to  the  exigencies  of  trade 
and  competition,  but  a  public  service,  and  as  such  subject 

[118] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

to  proper  regulation,  and  at  the  same  time  that  it  is  en- 
titled to  reasonable  protection. 

Regulation  without  protection  would  be  such  tyranny 
as  would  be  abhorrent  to  an  enlightened  people.   .   .   . 

Fire  insurance  ...  is  one  of  the  important  economic 
factors  in  our  civilization,  and  as  such  should  be  treated 
in  a  broad  way  and  its  relation  to  the  state  broadly  de- 
fined. 

After  a  careful  examination  of  premiums,  losses, 
and  expenses  the  Commission  states : 

We  are  unable  to  find  any  (ten-year)  period  where  the 
aggregate  net  profits  have  exceeded  about  three  per  cent., 
while,  as  will  later  be  shown,  during  the  past  ten  years  in 
the  United  States,  instead  of  being  a  net  profit,  there  has 
been  a  net  loss  on  the  aggregate  sales  of  fire-indemnity. 

As  to  the  second  source  of  revenue — interest  on 
assets : 

This  would  yield  the  companies,  as  interest  upon  the 
unearned  premium  reserve,  say,  two  per  cent,  annually, 
which  added  to  the  three-per-cent.  profits  from  the  sale 
of  Indemnity  during  the  most  profitable  decades  in  the 
history  of  the  business,  would  leave  a  net  profit  to  all 
companies  upon  all  business  of  not  over  five  per  cent. 

This  estimate  does  not  Include  the  large  number  of  com- 
panies that  have  been  forced  out  of  business  by  city  con- 
flagrations or  other  causes,  nor  the  companies  still  In  ex- 
istence that  have  had  their  assets  depleted  or  destroyed 

[119] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

by  conflagrations  and  have  made  the  Impairment  good  by 
contributions  from  stockholders  or  by  sales  of  new  stock. 
A  number  of  the  most  prominent  stock  fire  companies 
now  doing  business  in  this  country  have  been  saved  from 
destruction  In  this  way,  and  so  far  as  the  fire  companies  of 
this  state  are  concerned,  the  Chicago  fire  wiped  every  Illi- 
nois company  out  of  existence,  while  the  San  Francisco 
fire  ruined  three  of  the  largest  Illinois  companies.  Two 
of  these  companies  passed  out  of  existence,  while  one  is 
able  to  continue  in  business  because  its  stockholders 
heroically  restored  Its  entire  assets  out  of  their  own 
pockets. 

It  is  facts  such  as  these  that  cause  fire  underwriters 
of  the  longest  experience  to  contend  that,  taking  the 
country  as  a  whole,  no  profit  has  been  made  from  the 
sale  of  fire-Indemnity  during  the  past  fifty  years  or  since 
statistics  have  been  kept. 

The  report  notes  that  "while  the  stockholder  may 
not  expect  an  average  return  of  over  five  per  cent, 
for  the  chances  he  takes,  the  losses  for  a  single  year 
of  exceptional  conflagration  will  wipe  out  his  profits 
for  a  great  number  of  years";  and  adds: 

The  public  mind  does  not  seem  to  grasp  the  Idea  that 
stock  Insurance  is  its  only  protection  against  great  con- 
flagrations or  that,  under  the  principle  of  mutuality  which 
Is  fundamental  in  this  form  of  Insurance,  the  losses  result- 
ing from  these  conflagrations  must  In  some  way  be  met 
by  policy  holders  generally,  through  a  rate  advance.   .   .   . 

With  these  facts  before  you,  it  is  for  your  legislative 

[120] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

wisdom  to  decide  In  what  spirit  you  will  deal  with  the  fire- 
insurance  business — whether  you  will  treat  it  as  a  par- 
asitic form  of  gambling  activity  that  preys  upon  the  com- 
munity, or  as  an  Indispensable  form  of  service  to  the  body 
politic,  a  service  which  through  its  cash  guarantees,  pur- 
veys safety  and  confidence  to  commerce,  manufacturing, 
transportation,  banking,  and  property  Interests  generally, 
In  the  face  of  conflagrations  unparalleled  In  the  world's 
history. 

Your  commission  does  not  hesitate  to  state  its  convic- 
tion that  the  latter  Is  the  only  true  point  of  view.  Stock 
fire  Insurance  Is  an  indisputable  necessity  to  the  public. 
Other  forms  of  insurance  are  by  their  nature  limited  in 
their  scope  of  utility  and  of  comparatively  little  value  in 
affording  protection  In  times  of  disaster.  They  serve  but 
a  small  portion  of  the  community  and  protect  but  a  small 
part  of  our  property  values,  and  as  an  economic  necessity 
could  be  dispensed  with  without  appreciable  hardships  to 
the  public,  while  stock  fire  Insurance  cannot  be  so  dis- 
pensed with  until  the  time  comes,  if  ever,  when  some 
better  form  of  transacting  the  business  shall  have  been 
devised. 

Upon  the  important  subject  of  taxation  the  report 
says, 

This  state  taxation  on  gross  sales  Is  as  much  as  the  ag- 
gregate net  profits  of  all  companies  from  the  sales  of  fire- 
indemnity  and  seems  to  Indicate  that  stock  fire  Insurance 
is  transacted  as  a  sort  of  silent  partnership  (limited)  with 
the  state.  In  which  the  state's  half  of  the  profits  has  more 

[121] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

than  the  certainty  of  dividends  on  cumulative  preferred 
stock  In  a  corporation,  for  the  State  secures  Its  preferred 
dividend  regardless  of  whether  the  business  has  made  or 
lost  during  the  year. 

And  again, 

This  (taxation)  is  an  element  of  expense  which  seems 
to  be  Indefensible  from  any  view-point  and  which  is  en- 
tirely under  the  control  of  the  State. 

The  above — but  the  merest  glimpse  at  the  report 
— is  an  indication  of  its  general  tone;  the  recom- 
mendations for  legislation  were  in  conformity  with 
the  conclusions.  Obviously  this  was  not  big-game 
hunting  of  the  hoped-for  kind  and  it  is  little  wonder 
that  the  more  reckless  sportsmen  among  the  legisla- 
tors felt  disappointed. 

New  York's  investigation  began  in  November, 
1910,  and  lasted  for  six  weeks.  It  was  even  more 
exhaustive  than  that  of  Illinois,  and  it  made  a  pains- 
taking examination  of  one  hundred  and  seventeen 
witnesses  representing  every  phase  of  the  business. 
An  able  document  of  one  hundred  and  sixty-four 
pages  presented  its  findings.  These,  as  in  the  other 
report,  were  largely  of  an  economic  nature.  At  the 
outset  the  immense  importance  of  the  subject  is  as- 
sumed by  defining  fire  insurance  as  the  agency  for 
distributing  the  nation's  $250,000,000  annual  fire- 
loss  over  the  whole  community,  "so  that  it  shall  not 
deal  a  crushing  blow  to  those  who  have  sufiPered," 

[122] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

and  it  also  views  fire-insurance  as  "the  foundation  of 
the  modern  credit  system." 

The  New  York  report  analyzes  and  condemns 
*'Anti-Compact"  and  "Valued  Policy"  legislation, 
calling  the  former  a  "failure"  and  the  latter  a  "species 
of  insurance  heresy";  it  recommends  the  use  of  the 
Co-Insurance  Clause  as  "a  valuable  basis  for  equitable 
rating,"  criticizes  the  size  of  agency  commissions, 
finds  that  "the  companies  on  the  whole  have  not 
made  an  excessive  profit,"  and  believes  that  "if  com- 
panies are  allowed  to  combine,  then  it  must  be  only 
on  the  assurance  that  the  rates  will  be  equitable." 
It  considers  the  taxation  by  the  state  to  be  excessive; 
"no  reason  has  been  discovered  in  this  inquiry  why 
the  burden  of  government  should  fall  more  heavily 
on  this  business  than  on  other  forms  of  corporate 
activity  beyond  the  fact  of  the  ease  of  collection  of 
the  tax."  "Apparently  the  tax  comes  out  of  the 
profits  of  the  business,"  it  continues;  "in  reality  it 
comes  out  of  the  pockets  of  the  policy-holders." 

The  panacea  of  state  regulation  in  the  matter  of 
rates  did  not  appeal  to  the  committee;  the  report 
urges  "grave  objections"  against  it  and  thinks  that 
it  "should  be  invoked  only  as  a  last  resort."  Then 
follows  this  interesting  statement: 

COMPLAINTS    BY   THE    INSURED 

When  one  begins  to  search  for  the  state  of  affairs  in 
fire  insurance  which  would  warrant  this  extreme  measure 
(state  regulation),  he  is  surprised  to  find  that  it  does  not 

[123] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

seem  to  exist.  This  committee,  when  it  began  its  work, 
sent  out  over  six  hundred  letters  to  all  the  commercial  or- 
ganizations in  this  state,  inviting  complaints  on  the  subject 
of  fire  insurance.  It  was  furthermore  requested  that  the 
letter  be  published  in  local  papers,  and,  as  a  matter  of 
fact,  it  was  given  a  large  additional  circulation  in  trade 
papers;  it  was  sent  out  by  the  Bar  Association  of  New 
York  City  to  each  of  its  members,  and  it  was  given  special 
notice  in  the  publications  of  the  National  Association  of 
Credit  Men,  who  had  already  interested  themselves  in  the 
subject  of  fire  insurance.  There  were  not  over  a  dozen 
complaints  which  were  received  in  reply.  Some  other 
complaints  were  received  during  the  progress  of  the  in- 
vestigation. 

Altogether,  about  thirty  persons  appeared  before  the 
committee  to  make  formal  complaints,  and  nobody  who 
desired  to  make  complaints  before  the  committee  was  re- 
fused permission. 

Most  of  the  complaints  were  either  with  regard  to  arbi- 
trary increase  in  rates  or  from  brokers  who  had  been 
refused  certificates  by  the  Exchange.  ...  In  most  of  the 
cases  the  increase  in  rate  was  found  to  mark  the  transition 
from  a  period  of  loose  rating  to  one  of  exact  schedule 
rating,  and  the  reasons  given  for  the  great  advance  were 
that  the  old  rate  was  grossly  inadequate.  Most  of  the 
complaints  In  suburban  territory  were  with  regard  to  the 
increase  In  rates  that  had  been  made  when  the  Suburban 
Exchange  was  founded.  Evidence  was  brought  forward 
by  the  companies  to  show  that  they  had  been  losing  money 
in  the  suburban  territory  before  the  formation  of  the  ex- 

[124] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

change  and  that  the  rates  established  were  no  higher  than 
on  other  risks  in  other  parts  of  the  country. 

In  the  absence  of  any  exact  figures,  the  committee  was 
not  able  to  judge  whether  or  not  the  final  rates  were  just, 
but  the  rates  on  these  risks  were  not  shown  to  be  dis- 
criminatory. 

Over  against  these  complaints  there  was  considerable 
testimony,  particularly  on  the  part  of  large  insurers,  that 
their  rating  in  this  state  was  being  done  in  an  acceptable 
manner,  and  a  very  great  appreciation  of  the  economic 
value  of  schedule  rating.  In  fact,  a  petition  was  received 
by  the  committee,  signed  by  forty-five  leading  buyers  of 
insurance,  commending  the  principle  of  schedule  rating 
and  opposing  unbridled  competition. 

Of  the  National  Board  the  report  observed, 

It  can  be  said  that  the  work  of  the  National  Board 
is  in  the  highest  degree  public-spirited  and  its  activities 
are  to  be  highly  commended. 

And  the  history  of  fire  insurance  was  summed  up 
in  a  searching  comment: 

The  old  type  of  underwriter  is  passing.  He  did  not 
believe  in  preventing  fires;  fires  were  what  made  business 
for  the  underwriters;  it  was  the  function  of  insurance 
simply  to  distribute  the  fire-loss  and  if  people  preferred 
to  burn  their  property,  it  was  not  his  business  to  interfere; 
it  was  his  business  to  see  that  plenty  of  premiums  were 
collected  to  pay  the  losses, — it  was  not  important  who  paid 

[125] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

them,  so  long  as  they  came  in;  incidentally,  however,  he 
had  a  shrewd  eye  for  the  business  in  which  there  was  a 
good  profit  and  let  his  less  keen  brother  take  the  rest. 

That  type  has  nearly  gone.  The  new  underwriter  has 
his  face  turned  in  quite  another  direction.  His  motto 
is :  "Equitable  rates  and  fire  prevention  and  a  steady 
profit,  all  through  combination." 

The  Pennsylvania  commission's  report  of  191 5  is 
similar  in  general  character  to  those  of  Illinois  and 
New  York.  It  examined  "a  hundred  or  more  wit- 
nesses" and  reached  conclusions  not  dissimilar  to 
those  already  quoted.  Its  nature  may  be  known  by 
two  extracts.  The  first  refers  to  the  much  agitated 
question  of  "state  insurance," 

Thus,  after  briefly  considering  the  state  fire-insurance 
problem,  we  believe  that  the  people  of  this  state  will 
heartily  coincide  with  us  in  disapproving  the  proposition 
as  utterly  impractical  at  this  time  and,  in  all  probability 
in  a  community  such  as  Pennsylvania,  for  all  time  to  come. 

The  second  extract  refers  to  rating  bureaus  and 
concludes  the  report, 

In  conclusion,  your  commission  finds  from  the  testimony 
adduced  before  it  .  .  .  that  such  combinations  of  insur- 
ance companies,  or  their  representatives  or  agents,  are 
in  accordance  with  a  wise  public  policy,  are  necessary  to 
the  solvence  of  the  Insurance  companies  and  are  beneficial 
to  the  public  .  .  . 

[126] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

Wisconsin,  the  home  of  the  "Valued  Policy," 
might  reasonably  be  looked  to  for  more  radical  ex- 
pression, and  it  fulfilled  expectations.  True,  it  pre- 
pared for  the  abandonment  of  the  "Valued  Policy," 
by  pronouncing  it  "absolutely  vicious"  in  principle, 
but  the  investigators  now  proclaimed  the  discovery 
of  "Compulsory  State  Insurance."  "That  these  ends 
are  highly  desirable,"  they  stated,  "there  can  be  no 
question."  Such  a  trifling  detail  as  the  assumption 
by  a  single  state  of  the  burden,  if  a  great  conflagra- 
tion should  occur  within  its  borders,  seems  to  have 
been  viewed  by  the  committee  as  negligible,  since 
they  omitted  to  take  it  into  consideration.  However, 
they  conceded  that  the  Great  Reform  "must  come 
about  gradually."     In  the  mean  time — 

The  day  of  unrestricted  competition  is  certainly  past. 
A  recognition  of  the  benefits  of  proper  cooperation  is 
becoming  general.  Insurance  companies  will  soon  be  and 
are  even  now  being  called  upon  to  demonstrate  that  they 
are  the  most  efficient  agencies  for  performing  the  work 
of  collecting  the  premiums  and  paying  the  fire-losses.  In 
common  fairness,  as  well  as  in  the  public  Interest,  they 
should  be  permitted  to  demonstrate  what  they  can  do 
under  the  fullest  freedom  to  properly  cooperate. 

The  19 1 5  message  of  Governor  Phillip  to  the  Wis- 
consin legislature  throws  an  interesting  side-light 
upon  the  subject  of  state  insurance.  It  has  been  the 
policy  of  Wisconsin,  since  1903,  to  assume  the  fire 
risk  on  its  own  buildings.     The  insurance  carried  on 

[127] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

State  property  by  the  state  amounts  to  $17,670,000 
and  there  is  also  provision  for  insuring  the  property 
of  cities,  counties,  villages,  and  school  districts  in 
the  state.  The  Governor  notes  that  the  surplus  in 
the  insurance  fund  amounted  to  $12,306.06  but  that 
the  Board  of  Regents  of  the  normal  schools  was 
suing  for  $106,800,  in  settlement  of  a  loss  caused  by 
the  burning  of  the  State  Normal  School  at  Superior. 
"It  is  evident,"  says  the  Governor,  "that  if  the 
Courts  order  the  payment  of  this  amount  the  insur- 
ance fund  will  show  a  deficit,  which  means  that  the 
premiums  attributed  to  the  insurance  account  in 
the  past  ten  years  have  not  accumulated  a  fund  that 
protects  the  state  against  loss  either  by  fire  or  tor- 
nado. .  .  .  The  present  condition  of  this  fund  after 
an  experience  of  ten  years  demonstrates  conclusively 
that  state  insurance  on  the  basis  on  which  it  has  been 
carried  on  is  a  failure.  ...  I  therefore  recommend 
that  the  present  system  of  state  fire  insurance  be  dis- 
continued, and  more  reliable  insurance  be  substi- 
tuted therefor." 

Missouri,  with  its  traditional  fondness  for  being 
"shown,"  was  naturally  to  be  found  among  the  in- 
vestigating states;  incidentally  it  learned  some  things 
about  its  own  fire-waste;  for  example: 

In  some  few  Instances  rates  were  satisfactory  to  the 
communities,  but  generally  there  was  persistent  as  well 
as  insistent  demand  that  rates  were  too  high  and  should 
be  lowered.     This  demand  for  the  immediate  lowering 

[128] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

of  rates  in  the  aggregate  Invariably  was  modified  when 
the  chairman  requested  a  member  of  the  commission  to 
read  the  actual  figures,  in  dollars,  of  the  amount  that  was 
each  year  lost  by  fire  consumption  in  the  state.  It  is  not 
too  strong  to  say  that  when  the  sum-total  for  the  entire 
state  was  laid  before  the  audience,  the  enormous  amount 
seemed  to  astound  the  audience  and  as  It  was  borne  Into 
the  minds  of  those  attending  the  meetings  that  the  greater 
portion  of  this  loss,  which  they  were  paying  for  by  their 
high  rates,  was  due  to  carelessness  and  culpable  negligence 
— demand  for  action  on  the  part  of  the  state  which  would 
at  least  tend  to  correct  such  a  situation  was  pronounced 
and  insistent. 

Again  it  was  stated: 

The  fire-waste  In  Missouri  amounts  to  about  twice  the 
entire  cost  of  the  state  government.  Including  the  expense 
of  every  department  and  the  maintenance  of  its  educa- 
tional, eleemosynary,  legal,  penal,  and  other  Institutions. 
We  were  required  to  work  long  hours  to  pay  for  our 
country's  fire-waste  and  destruction,  and  Its  saddest 
feature  is  that  observation  and  statistics  disclose  that  at 
least  one-half  of  this  loss  is  pure  and  preventable  waste 
and  could  be  avoided  If  the  means  at  the  command  of  the 
state  were  Invoked  and  proper  individual  and  communal 
precaution  were  exercised. 

The  commission  gave  considerable  attention  to  the 
subject  of  rate-making  bodies,  and  said, 

While   skeptical  in  the  beginning,   our  investigations 

[129] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

have  convinced  us  that  the  economic  forces  supporting  this 
practise  cannot  be  restrained  and  that  in  the  making,  or 
rather  estimating  rates,  joint  and  cooperative  action  must 
be  recognized  in  such  cases  as  the  companies  see  fit  to 
adopt  it,  subject,  of  course,  to  proper  limitations  and 
official  supervision. 

The  Missouri  commission's  recommendations  were 
somewhat  more  radical  than  its  findings  and  included 
an  elaborate  system  of  rate-control,  subject  to  the  ex- 
perience of  the  companies  on  a  five-year  basis,  at  the 
option  of  the  state  superintendent  of  insurance. 

In  191 1,  Illinois  sent  a  second  expedition  into  the 
''big-game"  region,  and  a  bill  creating  the  office  of 
state  rate-supervisor  was  the  result;  it,  however, 
failed  of  enactment  into  law.  North  Carolina  and 
Kentucky,  as  well,  traversed  the  familiar  field.  Both 
of  them  recommended  the  control  of  rates  by  the 
state.  Kentucky  laid  special  emphasis  upon  the 
necessity  for  more  adequate  fire-prevention  measures, 
and  commended  the  "most  effective  work"  of  the 
National  Board  of  Fire  Underwriters,  "without 
which  the  loss  record  would  no  doubt  have  been  pro- 
hibitive." Both  states  pronounced  against  "Valued 
Policy"  legislation.  The  commissions  of  Ohio  and 
New  Jersey  did  not  report. 

In  all,  it  had  been  a  busy  season,  and  the  publicity 
value  had  been  great.  Certain  facts  seemed  no 
longer  open  to  dispute.  It  had  been  generally  ad- 
mitted that  the  business  of  fire  insurance  was  funda- 

[130] 


AN  ERA  OF  LEGISLATIVE  INVESTIGATION 

mental  to  the  continuance  of  prosperity  and  the  main- 
tenance of  credit,  that  it  was  semipublic  in  its  char- 
acter and  national  in  its  scope,  that  any  serious  inter- 
ference with  its  operation  would  react  harmfully 
upon  the  general  public,  that  the  average  premium- 
rate  was  not  excessive,  that  the  companies  were  mak- 
ing comparatively  small  profits,  that  cooperation 
among  them  was  to  the  interest  of  the  public,  that 
there  was  no  indication  of  corruption  or  other  abuses, 
and  that  the  companies  were  rendering  public  service 
in  the  matter  of  fire  prevention.  In  particular,  the 
National  Board  had  been  singled  out  by  several  of 
the  states  for  special  praise.  There  was  no  longer 
a  cloak  of  mystery  about  the  business  of  fire  insur- 
ance. 

In  the  mean  time  the  organic  life  of  the  board  had 
been  progressing  steadily  along  the  various  lines  in- 
dicated in  Chapter  XII.  The  members  were  keenly 
interested  in  the  several  legislative  investigations,  but 
the  large  activities  of  the  standing  committees  were 
not  neglected. 

In  1910,  Alonzo  W.  Damon,  of  the  Springfield 
Fire  &  Marine  Insurance  Company,  was  elected  to 
the  presidency;  he  was  succeeded,  in  191 1,  by  George 
W.  Babb,  of  the  Northern  Assurance  (London) ,  who 
held  office  for  two  years.  In  1913,  William  N. 
Kremer,  of  the  German-American,  advanced  to  the 
highest  office  from  that  of  vice-president,  and  in 
191 5,  the  honor  fell  upon  Ellis  G.  Richards,  of  the 
North  British  and  Mercantile. 

[131] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Among  the  important  events  of  the  period  had 
been  the  establishment  of  an  Actuarial  Bureau  as 
the  result  of  a  letter  from  Mr.  Richards.  Of  this, 
more  will  appear  in  the  next  chapter. 


[132] 


T 


XIV 

PRESENT  PHASES  OF  THE  WORK 

IMES  change.  In  1880,  one  of  the  daily 
papers  expressed  its  opinion  on  the  duties 
of  underwriters  as  follows : 


Prevention  should  be  a  part  of  their  business,  and,  in 
fact,  is  a  part  of  their  practise,  for  the  examination  and 
surveys  they  make  and  the  conditions  they  insist  upon 
.  .  .  are  ordered  entirely  in  view  of  the  prevention  of 
fires. 

To  this,  an  insurance  journal  made  indignant  re- 
sponse, and  expounded  the  doctrine  of  the  day  in 
these  words: 

The  object  of  the  underwriter  Is  to  insure  against  a 
danger  which  exists,  and  not  against  one  which  is  pre- 
vented. 

If  a  danger  is  averted  or  prevented,  there  is  no  occa- 
sion for  the  underwriter  at  all. 

Thirty-one  years  later,  the  president  of  the  Na- 
tional Board  stated  unequivocally, 

We  are  now  recognized  as  an  institution  whose  work 
is  almost  entirely  of  an  educational,  engineering  and  pub- 
lic-service character,  exerting  an  influence  toward  uniform- 
ity and  better  practises  in  the  business. 

[133] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

He  said  this  publicly  before  the  leading  under- 
writers of  the  United  States  and  no  one  dissented. 
The  experience  of  the  twentieth  century  had  brought 
more  wisdom  than  the  theory  of  the  nineteenth. 

Fifty  years  of  eventful  history  have  wrought 
great  changes  in  the  organization  which  opened  a 
tiny  office  with  two  employees  in  the  year  following 
the  close  of  the  Civil  War.  To-day  the  National 
Board  occupies  two  large  floors  at  76  William 
Street,  in  New  York  City,  and  carries  eighty-one 
names  upon  its  immediate  pay-roll.  It  is  a  leading 
factor  in  such  organizations  as  the  Underwriters' 
Laboratories,  the  National  Fire  Protection  Associa- 
tion, and  the  Insurance  Library  Association  of  Bos- 
ton. In  place  of  the  old  rate-making  machine,  there 
now  exists  a  vast  and  complicated  mechanism  whose 
work,  unknown  to  millions,  is  really  one  of  the 
strongest  constructive  forces  of  American  civiliza- 
tion. We  have  seen  this  machine  in  the  building 
and  yet  may  not  have  grasped  the  scope  and  power 
of  its  operations;  it  must  be  watched  in  motion. 

The  National  Board  appeals  to  the  American  love 
of  sheer  magnitude;  it  is  a  giant  even  among  the 
giants  of  the  modern  business  world.  The  gross 
amount  of  fire  insurance  in  force  in  the  United  States 
is  more  than  sixty  billion  dollars,  and  approximately 
90  per  cent.,  or  fifty-four  billions  of  this  is  carried  by 
companies  of  the  National  Board.  The  stupendous 
total  represents  at  least  thirty  million  separate  poli- 
cies; directly  or  indirectly  it  concerns  the  life  of 

[134] 


PRESENT  PHASES  OF  THE  WORK 

almost  every  individual  in  the  land;  the  gross 
premiums  charged  approximate  $600,000,000.  The 
National  Board  is  an  organization  in  which  one  hun- 
dred and  thirty-two  of  the  leading  companies  are 
represented  by  their  executive  officers.  These  com- 
panies have  total  assets  of  $620,000,000;  their  agents 
would  form  an  army  of  several  hundred  thousand 
men,  and  they  maintain  offices  in  about  60,000  sepa- 
rate cities  and  towns. 

The  board,  however,  is  in  no  sense  a  corporation 
or  a  legislative  body;  it  is  strictly  a  service  institu- 
tion— to  the  public  and  to  its  members.  This  will 
be  appreciated  from  a  study  of  the  machine  in  opera- 
tion. 

THE  EXECUTIVE  COMMITTEE 

The  National  Board  proper  meets  but  once  a  year, 
unless  some  emergency  arises.  At  this  meeting,  held 
in  the  month  of  May,  it  elects  officers,  listens  to  re- 
ports, and  fills  the  three  or  four  vacancies  annually 
occurring  in  the  Executive  Committee;  then  it  ad- 
journs and  the  Executive  Committee  takes  up  the 
burden  of  work.  For  most  of  the  year  this  com- 
mittee is  practically  the  board  itself.  It  has  thirty- 
four  members,  of  whom  eleven  are  elected  for  three- 
year  terms,  which  expires  successively  in  groups,  and 
the  remainder  consists  of  the  president,  vice-presi- 
dent, secretary  and  treasurer  of  the  board,  and  the 
chairmen  of  the  standing  committees,  as  ex-officio 
members,    and   the   ex-presidents   of   the   board   as 

[135] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

honorary  members.  In  addition  to  these,  two  un- 
derwriters of  long  service  to  the  profession,  Eldridge 
G.  Snow,  President  of  the  Home  Insurance  Com- 
pany, and  Uberto  C.  Crosby,  formerly  United  States 
Manager  of  the  Royal  Exchange  Assurance  Com- 
pany, have  been  made  honorary  life  members  of  the 
Executive  Committee.  No  elected  member  may 
succeed  himself  upon  the  expiration  of  a  term;  thus 
a  democratic  principle  is  maintained.  The  Execu- 
tive Committee  holds  sessions  monthly,  save  in  July 
and  August.  It,  however,  is  merely  the  framework 
of  the  machine  and  its  big  balance-wheel;  the  whole 
interesting  play  of  the  complicated  mechanism  is 
performed  by  the  various  standing  committees. 

THE  COMMITTEES  ON   FINANCE  AND  MEMBERSHIP 

Two  of  these  committees,  those  on  Finance  and  on 
Membership,  require  no  explanation;  their  counter- 
parts are  to  be  found  in  most  organizations. 

THE  COMMITTEE  ON  LAWS 

None  of  the  committees  has  stood  out  more  con- 
spicuously in  the  legislative  era  than  this  one.  Un- 
derwriters of  former  days  had  much  to  say  about 
oppressive  legislation.  In  reality,  they  experienced 
but  the  first  tricklings  of  that  deluge  of  legislative 
regulation  whose  mighty  proportions  have  been 
among  the  wonders  of  the  past  decade.  A  Com- 
mittee on  Legislation  and  Taxation  had  been  or- 
ganized to  deal  with  the  situation,  and  its  work  was 

[136] 


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PRESENT  PHASES  OF  THE  WORK 

supplemented  by  local  committees  in  the  different 
states;  but  this  arrangement  was  limited  by  the  nar- 
row outlook  of  the  state  committees.  Plans  to  meet 
local  situations  were  adapted  to  their  immediate 
surroundings;  thus,  what  might  be  temporarily  ex- 
pedient in  Oregon  would  prove  demoralizing  in 
Florida  or  Maine.  Such  a  method  could  not  apply 
universally  to  the  needs  of  a  business  as  boundless  as 
the  whole  country,  but  nothing  better  had  been  de- 
vised in  the  (legislatively)  antediluvian  days. 

Then  came  the  flood.  As  its  waters  began  to  rise, 
the  outlook  became  desperate.  Laws  were  proposed 
in  some  states  that  would  have  made  the  business 
of  fire  insurance  practically  impossible.  The  com- 
pany officials  composing  the  general  committee 
found  that  its  work  was  making  burdensome  de- 
mands upon  their  time  which  they,  as  busy  men,  could 
ill  afford.  They  also  realized  that  there  was  the 
need  for  trained  lawyers  and  advocates,  under  com- 
mittee supervision,  to  appear  before  the  various  legis- 
lative bodies. 

At  this  juncture,  the  (Western)  Union,  an  insur- 
ance organization  of  the  Middle  West,  organized  a 
joint  law-office  for  its  membership,  and  placed  Oscar 
B.  Ryon,  formerly  special  attorney  for  the  Illinois 
Insurance  Department,  in  charge.  This  was  accom- 
plished in  1912. 

Meanwhile,  the  National  Board,  having  been  im- 
pressed with  the  necessity  of  similar  work  through- 
out the  country,  decided  that  it  would  be  unwise  to 

[137] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

have  two  organizations  within  the  business  for  the 
same  class  of  activities.  Conforming  to  the  action 
of  the  Law  Committee,  its  chairman,  Morell  O. 
Brown,  and  General  Manager  Mallalieu  conferred 
with  the  Union  with  a  view  to  merging  its  law  office 
into  the  larger  work  of  the  National  Board.  This, 
the  Union  was  pleased  to  do,  and  the  merger  was 
consummated.  For  geographical  convenience,  the 
office  at  Chicago  was  continued  and  one  has  been 
recently  established  at  San  Francisco,  the  general 
headquarters  being  maintained  at  the  New  York 
office  of  the  National  Board.  All  of  the  offices  are 
under  the  immediate  direction  of  the  Committee  on 
Laws,  its  chairm?.n  and  general  counsel. 

Mr.  Ryon  and  his  associates  are  busy  men.  When 
it  is  considered  that,  beside  the  Federal  Congress 
at  Washington,  there  are  forty-eight  state  legis- 
latures, each  having  a  large  number  of  members,  any 
one  of  whom  has  the  right  to  drop  into  the  legislative 
hopper  any  individual  notions  he  may  possess  upon 
the  subject  of  fire  insurance,  it  will  be  seen  that  there 
is  no  chance  for  stagnation.  Any  one  of  these  legis- 
lators may  introduce  some  bill  w^hich,  if  enacted  into 
law,  might  destroy  underwriting  activities  in  that 
state;  and  perhaps  wipe  off  the  slate  half  a  billion 
dollars  of  insurance  contracts  upon  which  its  peo- 
ple's credits  are  predicated,  millions  of  dollars  in  pre- 
miums, and  throw  thousands  of  agents  out  of  employ- 
ment.    This  interesting  but  disquieting  possibility  is 

[138] 


PRESENT  PHASES  OF  THE  WORK 

in  the  main  latent,  but  sometimes  it  becomes  of  a  sud- 
den acutely  menacing.  There  are  periods  during 
the  legislative  season  when  the  air  is  charged  with 
danger.  Not  less  than  twenty-five  hundred  fire-in- 
surance bills  made  their  appearance  in  the  legislative 
year  ending  May  2J ,  IQI S-  Fortunately,  it  is  safe 
to  assume  that  most  of  the  inimical  measures  arise 
from  ignorance  or  prejudice  and  can  be  defeated  by 
a  plain  showing  of  facts. 

Those  interesting  measures,  known  in  the  vernacu- 
lar as  "strike  bills"  now  are  rarely  introduced  against 
fire  insurance.  The  Law  Committee  has  caused  it  to 
be  widely  known  that  under  no  circumstances  will  it 
bargain  for  the  passage  or  defeat  of  legislation. 
But  there  is  an  ever-present  danger  from  three 
sources — politics,  revenge  and  misguided  zeal.  It 
comes  from  the  first  source  in  an  opportunity  for 
political  capital  and  newspaper  advertising  arising 
from  an  attack  upon  capital  by  some  self-styled  cham- 
pion of  "the  common  people" — the  fire  insurance 
companies  being  the  most  accessible  for  the  purpose; 
from  the  second,  in  a  fancied  grievance  on  the  part 
of  some  legislator  or  constituent  and  results  in  the 
introduction  of  a  measure  for  the  purpose  of  "getting 
even."  But  the  misguided  zealots,  honest  in  inten- 
tion but  without  knowledge  of  the  special  problems 
of  underwriting,  present  the  greatest  danger.  They 
usually  are  the  authors  of  the  most  revolutionary 
plans  and  their  pride  of  authorship  makes  them  the 

[139] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

most  impatient  of  correction.  It  is  a  testimonial  to 
the  eternal  vigilance  of  the  Law  Committee  that  so 
few  bad  bills  are  finally  enacted  into  laws. 

In  addition  to  this  defensive  work  the  committee 
is  engaged  upon  the  construction  of  new  law^s,  upon 
departmental  rulings  and  in  assisting  to  prepare  the 
cases  which  occasionally  arise  in  the  various  state 
courts. 

THE  COMMITTEE  ON  INCENDIARISM  AND  ARSON 

The  Committee  on  Incendiarism  and  Arson  is  en- 
gaged in  defensive  work  of  another  kind.  It  used  to 
be  believed  that  fifty  per  cent,  of  the  fires  were  of 
criminal  origin;  but  such  an  estimate  w^as  long  ago 
shown  to  be  false;  the  percentage  of  incendiary  fires 
is  a  small  one  but  by  no  means  negligible.  Shocking 
cases  of  this  cowardly  crime  are  continually  un- 
earthed. Some  are  so  ingenious  in  method  as  almost 
to  bring  incendiarism  under  the  head  of  a  learned 
profession;  others  are  as  highly  organized  as  a  busi- 
ness. Judge  D.  Ostrander,  of  Chicago,  supplies  the 
following  instance : 

Some  two  years  ago,  a  request  came  to  me  from  a  pros- 
ecuting attorney  in  one  of  the  Middle  States,  that  I  con- 
fer with  him  immediately  concerning  a  gang  of  incendi- 
aries that  he  had  by  some  means  uncovered.  I  found  in 
his  possession  two  affidavits,  disclosing  the  names  of  many 
scoundrels,  with  a  carefully  prepared  statement  of  their 
operations  during  the  several  years  of  their  confederated 

[140] 


PRESENT  PHASES  OF  THE  WORK 

existence.  In  this  list  of  rascals  were  the  names  of  sev- 
eral church  members,  one  banker,  one  wholesale  mer- 
chant, and  several  insurance  agents.  This  business  had 
been  carried  on  in  some  five  or  six  different  states,  and 
had  resulted  in  the  destruction  of  property  to  the  value 
of  several  hundred  thousand  dollars,  and  the  violent 
death  of  two  persons,  one  of  whom  had  been  murdered  to 
prevent  disclosures. 

Most  incendiary  acts  have  the  collection  of  in- 
surance as  a  motive,  and  for  this  reason  the  companies 
are  forced  always  to  be  on  their  guard.  The  ques- 
tion of  ''moral  hazard"  is  as  much  a  part  of  the  risk 
as  that  of  occupancy  or  exposure.  Insurance  is  never 
knowingly  issued  to  a  man  who  has  a  criminal  record 
or  who  has  had  suspicious  fires  on  premises  owned 
by  him.  The  National  Board  has  had  much  to  do 
with  bringing  about  the  creation  of  the  office  of  fire 
marshal,  a  sort  of  fire  coroner,  in  many  states,  and 
the  administration  of  its  Arson  Reward  Fund  has 
brought  nearly  four  hundred  criminals  to  punish- 
ment. How  many  thousands  of  fires  have  been  pre- 
vented through  the  publication  of  these  rewards  will 
never  be  known,  but  the  committee  believes  the  num- 
ber to  be  very  large. 

THE  COMMITTEE  ON  STATISTICS  AND  ORIGIN  OF 

FIRES 

Next  in  logical  order  is  the  Committee  on  Statistics 
and    Origin    of    Fires.     Whenever    fire-prevention 

[141] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

legislation  is  being  urged  in  any  state,  this  committee 
usually  is  on  hand  with  sledge-hammer  arguments; 
it  has  them  in  reserve  as  the  result  of  collecting  an- 
nual statistics  from  all  cities  exceeding  twenty  thou- 
sand population.  If  it  can  show  that  the  eighteen 
cities  of  one  state,  for  example,  with  no  general  con- 
flagrations, still  have  had  a  year's  total  of  nearly 
seventeen  thousand  separate  fires,  causing  $8,000,000 
in  losses  and  involving  $150,000,000  of  values,  and 
that  these  fires  were  largely  preventable,  it  is  difficult 
to  escape  the  conclusion  that  something  must  be  done 
in  the  matter  of  legislation.  The  Fire  Department 
chiefs  and  superintendents  of  Patrol  in  the  various 
cities  cooperate  with  this  committee  by  filling  out  the 
analytical  report  blanks  that  are  sent  to  them  each 
year. 

In  1906,  Mr.  Babb,  then  chairman  of  the  Com- 
mittee, conceived  the  idea  of  obtaining  similar  data 
from  European  cities,  and  these  were  secured 
through  the  aid  of  the  American  consuls.  His  report 
startled  the  annual  meeting  and  was  greeted  with 
hearty  applause — an  unusual  thing  in  this  dignified 
body.  Its  publication  caused  a  sensation  throughout 
the  country.  The  shocking  disproportion  between 
American  and  foreign  figures,  of  which  more  here- 
after, made  it  plain  that  in  this  respect  America  was 
certainly  backward  in  its  civilization,  and,  in  con- 
sequence, the  work  of  fire  prevention  was  stimulated 
in  a  marked  degree. 

[142] 


PRESENT  PHASES  OF  THE  WORK 

THE  COMMITTEE  ON   FIRE  PREVENTION 

At  this  same  1906  annual  meeting,  the  Committee 
on  Fire  Prevention  was  formed,  as  already  described, 
(Chapter  XII)  by  the  merging  of  two  other  com- 
mittees. From  that  time  until  the  present  day  it 
has  devoted  its  energies  to  examining,  reporting  on 
and  advising  as  to  the  fire  protection  facilities 
and  the  structural  conditions  and  hazards  of  cities, 
with  the  following  purposes,  as  described  in  the  Con- 
stitution of  the  National  Board:  To  secure  ade- 
quate water  supply  with  improved  systems  of  distri- 
bution; efficient  organization  and  modern  equipment 
of  fire  departments,  as  well  as  other  fire  protective 
measures;  also  to  encourage  the  adoption  of  building 
codes,  providing  for  improved  and  safe  methods  of 
construction.  The  studies  made  lead  naturally  to 
the  subject  of  conflagration  hazard;  which  is  to  say 
that  its  work  is  confined  to  cities.  The  Committee 
has  three  parties  of  engineers  in  the  field,  and  each 
party  contains  an  engineer  trained  in  water  works 
practises;  a  mechanical  engineer  to  report  on  fire 
departments,  fire  alarm  systems,  and  fire-department 
auxiliaries ;  a  structural  engineer  to  investigate  phys- 
ical conditions  in  the  mercantile  and  manufacturing 
districts ;  and  a  general  assistant. 

There  is  nothing  superficial  about  the  work  of 
these  engineering  parties.  They  move  from  city  to 
city  as  directed  from  the  home  office,  looking  for 
conflagration  hazard — and  finding  it.     The  urban 

[143] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

population  of  the  United  States  would  have  less  peace 
of  mind  did  it  realize  how  steadily  many  cities  are 
courting  danger.  A  party  of  National  Board  en- 
gineers engaged  in  hydrant  or  fire-engine  tests  may 
attract  the  momentary  attention  of  a  few  passers- 
by,  while  the  bulk  of  the  population  is  unaware  of 
their  presence;  yet  the  report  of  these  four  men  in 
their  rubber  boots  and  working-clothes  may  decide 
for  safety  as  against  disaster  to  the  community. 

Their  usual  method  is  to  begin  with  a  letter  to  the 
mayor  of  the  city,  asking  permission  and  cooperation 
in  the  inspection.  Therein,  it  is  emphasized  that  the 
National  Board  does  not  deal  with  premium  rates, 
but  desires  to  put  the  facts  before  all  who  are  inter- 
ested, in  the  belief  that  the  result  will  be  beneficial. 
Such  a  request  usually  meets  with  prompt  compli- 
ance although  sometimes  a  short-sighted  fire  depart- 
ment w^ill  raise  objections.  The  engineers  will  then 
rent  offices  and  settle  down  for  a  thorough  inspec- 
tion, which  in  the  case  of  a  city  of  a  hundred  thou- 
sand population  will  take  about  four  weeks,  and  a 
much  longer  time  in  larger  places. 

Water-supply  is  of  the  first  importance;  should 
this  fail,  as  it  did  in  San  Francisco  or  prove  inade- 
quate as  in  Salem,  Hot  Springs  and  Jacksonville, 
it  would  be  difficult  to  check  a  conflagration.  Ac- 
cordingly, the  engineers  look  into  every  detail  of  the 
water-supply.  They  study  its  sources,  the  reservoirs, 
the  flow,  the  pressure,  the  size  and  arrangement  of 
the  mains,  the  position  of  hydrants,  the  possibility 

[144] 


1.  Will  this  engine  he  ciiual  to  an  emergency?  In  order  to  answer  this  vital  question, 
the  engine  is  speeded  up  to  full  capacity  and  carefully  inspected  in  action  by  the 
National  Board  Engineers,  who  observe  the  steam  pressure,  water  pressure,  rate  of 
revolution,  etc.  2.  All  the  characteristics  of  a  water  tower  in  action  are  carefully 
noted  by  the  inspecting  engineers,  who  are  here  shown  standing  about  the  tower. 
Note  simultaneous  discharge  of  dtck  and  tower  pipes. 


In  all  cities  having  water  fronts,  the  fire  boat  is  an  important  adjunct.  X'ot  only  is 
it  available  for  water-front  fires,  but  in  many  instances  it  may  be  used  to  furnish 
additional  streams  on  fires  at  some  distance  from  the  harbor.  The  National  Board 
Engineers   are   here   shown   putting  a   fire  boat  through    rigorous   tests. 


1.  TIk  Xatiiiiial  Hoard  Inspector  is  here  shown  measuring  the  diameter  of  a  fire  boat 
deck  turret  nozzle.  2.  This  picture  shows  method  of  measuring  a  hydrant  discharge. 
Similar  measurements  at  other  hydrants  in  the  same  group  are  made  simultaneously 
with  this  one,  in  order  to  learn  whether  they  safely  may  be  calleil  into  service  at 
the    same    time. 


Gaging  the  stream  from  thiee  hose  lines  siamesed  into  one  nczzle.  The  inspector  has 
attached  a  I'itot  gage  to  the  nozzle,  and  is  here  shown  making  a  record  of  the  pres- 
sure at  fifteen-second  intervals.  He  takes  the  time  from  a  watch  strapped  to  liis 
arm.  Members  of  the  fire  department  under  inspection  are  always  interested  in 
these  tests. 


PRESENT  PHASES  OF  THE  WORK 

of  their  freezing,  and  every  other  essential  matter. 
For  example,  in  a  fire,  four  or  five  adjacent  hydrants 
will  probably  be  employed.  They  all  may  be  con- 
nected with  the  same  main.  Any  one,  by  itself,  may 
deliver  sufficient  volume  under  sufficient  pressure, 
while  several  in  simultaneous  use  will  find  the  supply 
they  furnish  much  reduced.  Such  a  condition  would 
mean  danger  at  a  fire.  The  engineers,  therefore, 
make  their  hydrant-tests  in  groups.  A  pressure-gage 
is  attached  to  the  central  hydrant  and  the  water  is 
turned  on.  The  needle  may  indicate  a  satisfactory 
pressure  of  thirty  pounds  or  more  to  the  square  inch; 
but  if,  as  others  are  turned  on  in  succession,  the 
pressure  should  drop  to  twenty  pounds  or  less  it  would 
be  proof  of  an  insufficient  supply,  which  must  be 
remedied.     This  is  but  one  of  the  hydrant-tests. 

Other  tests  are  equally  practical.  Engines  are 
called  successively  to  some  open  spot,  usually  in  the 
outskirts  of  the  town,  and  there  each  is  speeded  up 
until  the  smoke  clouds  roll  from  the  stack  and  a  solid 
column  of  water  from  the  nozzle  crashes  through 
the  dripping  tree-tops.  Meanwhile  the  engineers 
are  moving  about,  noting  steam-pressure,  gaging 
revolutions,  or  squatting  by  the  nozzle  with  a  Pitot 
gage  to  learn  the  pressure  of  the  stream;  and  all  of 
them  are  making  constant  notes  on  record  forms. 
The  local  fire  commissioner  and  fire  chief  are  also 
likely  to  be  present,  a  trifle  nervous  but  interested, 
and  getting  valuable  information  and  advice. 

Thus,   slowly  and  systematically,   the  Board  en- 

[145] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

gineers  cover  each  city  under  inspection,  recording, 
tabulating,  and  charting  every  point  that  affects  that 
city's  liability  to  burn  up,  and  then,  before  their  work 
may  be  considered  complete,  they  must  prepare  com- 
prehensive suggestions  for  correcting  whatever  is 
found  amiss.  The  final  report  is  a  complete  and 
valuable  document.  It  is  reviewed  by  other  en- 
gineers in  the  New  York  office  and  then  issued  to 
National  Board  companies,  to  city  officials,  and  to 
officers  of  trade  or  commercial  bodies,  to  a  few  in- 
fluential citizens  and  to  the  local  press.  Altogether 
some  two  hundred  and  fifty  cities  have  been  reported 
upon,  and  thirty-five  or  forty  are  added  each  year. 

Since  February,  1914,  an  engineer  has  been  en- 
gaged in  following  up  these  inspections ;  a  few  months 
after  the  issue  of  a  report,  this  engineer  visits  the  city, 
discussing  with  city  officials  and  interested  citizens 
the  more  important  findings  in  the  reports,  noting 
recent  and  contemplated  improvements,  and  advocat- 
ing the  adoption  of  the  recommendations,  especially 
those  considered  most  urgent;  finally  brief  bulletins 
or  supplements  are  prepared  and  sent  out,  giving  the 
results  obtained. 

What  are  the  results? 

They  are  numerous  and  sweeping,  including  such 
items  as  important  reforms  in  the  New  York  Fire 
Department,  modernization  of  the  fire  departments 
in  Cincinnati,  Bridgeport,  Birmingham,  and  Savan- 
nah; securing  of  improvements  long  and  unsuccess- 
fully urged  by  fire  chiefs  and  others  in  the  depart- 

[146] 


i 


PRESENT  PHASES  OF  THE  WORK 

ments  of  Springfield  (Massachusetts),  Shreveport, 
Freeport,  Atlanta,  Augusta,  Tampa,  Phoenix,  Oak- 
land, Portland  (Oregon),  Minneapolis,  Berkeley, 
and  Stockton;  erection  of  fire-alarm  headquarters  in 
various  important  cities;  securing  improved  water- 
supply  at  many  points;  defining  and  laying  out  con- 
gested-value districts  in  dififerent  cities;  improving 
fire  inspection,  and  drill  methods  in  many  fire 
departments;  drafting  and  introducing  methods  for 
rating  and  testing  fire-engines,  automobile  fire-ap- 
paratus, and  fire-boats,  now  in  use  by  many  cities, 
and  urging  better  building  laws.  The  value  of 
these  efforts  is  thoroughly  appreciated  in  official 
circles.  This  is  shown  by  the  fact  that  at  the  Con- 
vention of  the  International  Association  of  Fire  En- 
gineers, the  fire  chiefs'  organization,  the  official  tests 
are  now  made  by  the  National  Board  engineers. 

When  the  Panama-Pacific  Exposition  was  in  proc- 
ess of  construction,  the  authorities  secured  a  Na- 
tional Board  engineer  to  design  and  supervise  the 
fire-protection  system,  and  another  engineer  was  re- 
cently loaned  by  the  Fire  Prevention  Committee  to 
the  city  of  Boston  to  design  and  install  a  high-pres- 
sure water-system. 

In  1913,  at  the  request  of  the  Federal  government, 
engineers  of  the  National  Board  inspected  and  re- 
ported on  a  number  of  the  government  buildings  in 
Washington.  A  considerable  number  of  city  gov- 
ernments send  for  National  Board  engineers  to  con- 
duct tests  when  engines  are  to  be  purchased;  and  the 

[147] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

New  York  City  Municipal  Civil  Service  Commis- 
sioners have  had  National  Board  engineers  prepare 
papers  and  examine  for  promotion  to  every  grade  in 
the  Fire  Department,  as  well  as  conduct  practical 
tests  for  the  examination  of  engineers.  A  reputation 
that  would  bring  out  such  demands  could  not  have 
been  established  without  entire  confidence  in  the 
thoroughness  and  impartiality  of  the  Board  en- 
gineers. Incidentally,  these  important  forms  of  pub- 
lic service  are  conducted  at  National  Board  expense. 
There  is  an  interesting  reverse  side  to  all  this. 
Many  large  fires  would  not  have  occurred  had  the 
recommendations  of  the  engineers  been  acted  upon. 
Some  of  their  reports  seem  like  almost  uncanny  pre- 
dictions in  the  light  of  later  events.  A  report  on 
Minneapolis  called  attention  to  a  particular  block 
in  these  words : 

Stocks  are  heavy  and  combustibility  high ;  this,  with  the 
bad  structural  weaknesses,  makes  a  high-potential  hazard, 
which  is  materially  reduced  by  sprinkler  protection  in 
two-thirds  of  the  block.  However,  the  department  store 
at  the  southwest  corner,  which  is  not  sprinklered,  would 
make  a  very  fast  fire  and  .  .  .  could  set  up  conflagration 
conditions.  A  fire  is  not  apt  to  spread  across  the  street 
south,  as  the  exposed  building  is  sprinklered  and  has  a 
water  curtain. 

On  March  5,  191 1,  the  very  store  building  here 
mentioned  was  burned  and  damaged  the  western  half- 
block  to  the  extent  of  about  $1,100,000.     The  sprin- 

[148] 


J 


PRESENT  PHASES  OF  THE  WORK 

klers,  shutters  and  water  curtains  saved  the  exposed 
buildings  exactly  as  it  was  foretold  they  would  do. 
The  report  on  Salem,  Massachusetts,  stated : 

Conclusions — The  features  most  prominent  In  creating 
a  severe  conflagration  hazard  in  Salem  are  the  large 
amount  of  frame  construction  In  and  surrounding  high 
value  districts,  lack  of  protection  to  exposed  openings, 
generally  narrow  streets,  a  weak  fire  department  and  an 
unreliable  water-distribution  system. 

Every  one  knows  what  happened  on  June  25,  19 14; 
the  combination  of  frame  construction,  a  weak  fire 
department,  a  serious  reduction  in  the  water  pressure 
and  a  little  wind  were  responsible  for  a  fire-loss 
of  $13,000,000.  On  February  16,  1916,  Fall  River, 
Massachusetts,  witnessed  the  burning  of  two  "bad" 
blocks  of  which  warning  had  been  given  in  the  Na- 
tional Board  report  of  September,  191 5.  Such  in- 
stances could  be  supplemented  by  many  others;  they 
point  the  moral  as  to  what  too  frequently  occurs 
where  a  complacent  or  indifferent  community 
neglects  the  specific  recommendations  that  the  Na- 
tional Board  engineers  always  leave  behind  them 
after  inspection.  The  most  striking  case  of  fulfilled 
prophecy  is,  of  course,  that  of  San  Francisco,  which, 
at  the  time  of  inspection,  was  found  to  have  "violated 
all  underwriting  traditions  by  not  burning  up."  A 
story,  never  before  published,  shows  that  the  under- 
writers themselves  occasionally  fail  to  heed  the  les- 
sons of  the  inspections. 

[149] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

When  the  news  of  the  San  Francisco  fire  was 
flashed  across  the  continent,  a  National  Board  en- 
gineer who  was  in  a  city  which  is  the  headquarters 
of  a  prominent  fire-insurance  company,  was  asked 
by  the  president  of  this  company  to  bring  over  a  copy 
of  the  San  Francisco  report,  his  own  copies  having 
been  mislaid.  The  president  read  the  report  until 
he  came  to  the  warning  referred  to;  then  looked  up 
solemnly. 

"Mr. ,"  he  said,  "if  we  had  heeded  that  warn- 
ing and  had  reduced  our  San  Francisco  line  of  in- 
surance as  we  should  have  done,  it  would  have  saved 
this  company  a  vast  sum.  Yesterday,  we  had  a  large 
surplus;  to-day  we  may  be  insolvent.  I  cannot  tell 
until  I  know  how  much  we  have  lost." 

In  the  records  of  the  Committee  on  Fire  Preven- 
tion is  a  resolution  that  was  unanimously  adopted  by 
three  hundred  and  fifty  fire-chiefs  in  their  191 3  con- 
vention ;  it  reads: 

Whereas:  The  International  Association  of  Fire  En- 
gineers believe  sincerely  in  approving  the  work  of  con- 
servation by  every  agency  looking  to  the  reduction  of  the 
enormous  fire  waste,  and, 

Whereas:  The  intelligent  and  highly  efficient  work  of 
conservation  through  advisory  engineering,  the  advo- 
cating of  model  ordinances  governing  the  storage  of  In- 
flammable oils,  the  advantages  to  be  gained  to  the  prop- 
erties of  our  people  by  better  building  construction,  the 
publishing  of  statistical  tables  of  fires  and  the  educational 

[150] 


I 


PRESENT  PHASES  OF  THE  WORK 

efforts  of  the  National  Board  of  Fire  Underwriters  is  an 
agency  distinctly  conspicuous  in  this  field  of  splendid  en- 
deavor.    Therefore,  be  it 

Resolved:  That  the  International  Association  of  Fire 
Engineers  approves  the  work  of  the  National  Board  of 
Fire  Underwriters  and  especially  commends  the  work  of 
its  engineers  in  the  testing  of  fire-apparatus  and  the  in- 
spection of  fire-departments,  fire-alarms,  water-supplies 
and  structural  conditions  of  our  cities  and  would  encour- 
age said  National  Board  of  Fire  Underwriters  to  continue 
and  extend  its  activities  in  this  direction. 

THE  COMMITTEE  ON  CONSTRUCTION  OF  BUILDINGS 

The  above  resolution  makes  several  references  to 
the  work  of  another  of  the  board's  committees,  that 
on  Construction  of  Buildings,  whose  work  is  less 
picturesque  but  not  less  important  than  that  just 
described.  This  committee  has  been  in  existence  for 
many  years.  It  would  be  glad  to  see  all  the  buildings 
of  the  United  States  reconstructed  along  fire-proof 
lines,  but  as  this  is  too  large  an  ambition  for  even 
a  highly  competent  committee  to  attain,  it  directs  its 
energies  to  an  attempt  at  improving  the  standard  of 
new  construction.  This  is  largely  a  question  of  se- 
curing good  building-laws  in  the  different  cities  and 
states. 

The  committee  early  recognized  that  successful 
criticism  should  be  constructive;  it  was  not  sufficient 
to  condemn  bad  laws  without  showing  how  to  frame 
good  laws.     Hence  it  prepared  a  Model  Building 

[151] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Code  in  1905.  This  was  sent  gratis  to  officials  in  all 
cities  having  a  population  of  five  thousand  or  over, 
and  to  insurance  organizations,  insurance  commis- 
sioners, state  fire  marshals,  architects,  building  con- 
tractors, technical  schools,  and  others.  This  code  be- 
came a  standard;  it  passed  through  three  editions 
and  had  great  effect  upon  American  building-laws. 
In  191 5,  it  was  thoroughly  revised  according  to  the 
best  modem  practise,  and  recently  a  suggested  build- 
ing-ordinance for  small  towns  and  villages  has  been 
issued.  One  of  the  most  noteworthy  of  the  com- 
mittee's later  efforts  has  been  the  publication  of  a 
pamphlet  giving  simple  and  inexpensive  methods  for 
safeguarding  dwellings  from  fire.  This  is  impor- 
tant since  most  dwellings  are  outside  of  the  operation 
of  municipal  building-ordinances,  and  but  two  or 
three  state  governments  yet  exercise  any  authority 
over  such  construction. 

To-day  the  Committee  on  Construction  of  Build- 
ings is  a  clearing-house  for  information  upon  fire- 
resistive  building  construction  and  similar  technical 
subjects.  It  keeps  in  touch  with  city  and  state  com- 
missions that  are  preparing  building  laws  and  makes 
helpful  suggestions  from  the  standpoint  of  its  wide 
knowledge  of  the  subject.  Something  like  90  per 
cent,  of  these  suggestions,  upon  the  average,  are  ac- 
cepted. Thus,  the  committee,  operating  without 
expense  to  the  public,  is  another  of  the  silent 
unseen  influences  that  are  contributing  to  public 
safety. 

[152] 


I 


PRESENT  PHASES  OF  THE  WORK 

THE  COMMITTEE  ON   LIGHTING,   HEATING,  AND 
ENGINEERING  STANDARDS 

Several  committees  may  be  passed  over  without 
extended  notice.  That  on  Lighting,  Heating  and 
Engineering  Standards  is  the  intermediary  between 
the  Executive  Committee  and  the  Underwriters' 
Laboratories;  its  chairman,  by  virtue  of  his  office,  is 
a  director  of  the  Laboratories.  The  committee  has 
much  to  do  with  determining  the  adoption  and  print- 
ing of  standards  and  suggesting  regulations  for  the 
installation  of  hazardous  and  protective  devices  by 
the  National  Board. 

THE  COMMITTEE  ON  CLAUSES  AND   FORMS 

The  Committee  on  Clauses  and  Forms  prepares 
the  suggested  clauses  and  forms  that  are  attached  to 
the  policies,  covering  all  sorts  of  subjects.  These 
suggestions  are  merely  recommendations,  and  are 
never  mandatory  on  the  local  underwriting  organiza- 
tions to  which  they  are  referred. 

THE  COMMITTEE  ON  ADJUSTMENTS 

The  Committee  on  Adjustments  is  prepared  to 
handle  adjustments  of  losses  whenever  there  is  a  fire 
of  conflagration  proportion.  At  such  times,  public 
welfare  requires  that  the  immense  problem  of  adjust- 
ing the  settlement  of  hundreds  or  thousands  of  claims 
be  handled  with  all  possible  despatch.  The  ordinary 
methods  in  individual  fires  would  be  swamped  by 

[153] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

such  an  emergency,  but  the  committee  has  an  adjust- 
ment cabinet  and  trained  assistants  ready  to  start  at  a 
moment  for  any  stricken  city.  It  was  used  at  Salem, 
Massachusetts;  Augusta,  Georgia;  and  Paris,  Texas; 
with  good  results. 

THE  ACTUARIAL  BUREAU  COMMITTEE 

Now  comes  the  newest  development  of  National 
Board  activit}^,  its  Actuarial  Bureau,  which  might 
well  be  termed  the  Bureau  of  Vital  Statistics  of 
American  fire  insurance.  This  is  the  biggest  thing 
in  modern  underwriting  on  its  more  technical  side, 
and  is  nothing  less  than  an  effort  to  collect,  classify, 
tabulate,  and  interpret  the  entire  experience  of  fire- 
insurance  companies  upon  their  American  business. 
That  experience  consists,  primarily,  of  the  insurance, 
or  writings,  as  represented  by  the  many  millions  of 
policies  issued  each  year  by  the  companies  belonging 
to  the  bureau,  and  the  losses  which  these  companies 
sustain  under  these  policies.  The  purpose  is  to  es- 
tablish the  burning  ratio,  or  fire  cost,  in  every  class 
of  property.  The  magnitude  of  such  a  task  is  hard 
to  realize.  As  yet  the  companies  are  reporting  only 
their  losses  to  the  bureau  (the  reporting  of  writings 
commencing  probably  with  the  coming  year) ,  but 
even  at  this  stage  of  development  the  work  com- 
pletely engages  the  time  of  about  forty  employees 
and  the  capacity  of  much  labor-saving  machinery. 
The  favored  visitors  to  the  rooms  of  the  bureau  find 
much  to  interest  them.  It  appeals  to  the  imagina- 
tion.    Here  is  the  statistical  center  for  millions  of 

[154] 


CARD-PERFOKATIXG   ROU.M   OF  THE  ACTUARIAL   BUREAU 

Here  the  information  as  to  location  and  amount  of  loss  is  coded  and  transferrea  to 
cards  by  means  of  perforations.  Two  kinds  of  perforating  macliines  are  shown,  both 
producing  tlie  same  results,  although  radically  different  in  form.  One  operator  can 
punch   fifteen   to  seventeen  hundred  cards  per  day. 


THE  TAP.ULATOR   ROOM  OF  THE  ACTUARIAL  BUREAU 

Without  the  wonderful  machines  in  this  room,  it  would  not  he  practicable  to  conduct 
the  work  of  the  bureau.  In  the  tenter,  at  the  rear,  is  the  sorting  machme  in  which 
cards  are  sorted  at  the  rate  of  z6R  per  minute.  To  the  left,  is  a  tabulator  printer 
which  adds  money  values  on  cards  at  the  rate  of  58  per  minute,  printing  totals  at 
designnted  points  and  automatically  starti-ng  on  the  next  run.  The  files  contain 
ipproximately    750,000    tabulator    cards. 


I 


PRESENT  PHASES  OF  THE  WORK 

separate  transactions,  involving  inconceivable  totals 
and  affecting  the  w^elfare  of  pretty  nearly  every  prop- 
erty owner  in  the  United  States.  It  acts  upon  an 
enormous  tangle  of  facts  and  figures,  reduces  them  to 
order,  and  then  searches  for  the  fundamental  laws 
which  have  produced  them;  and  its  work  is  never 
finished,  since  each  day  brings  a  fresh  instalment. 
The  bureau  has  about  it  something  of  the  breathless 
haste  of  a  daily  paper's  editorial  rooms. 

Its  first  room  is  called,  in  fact,  "the  editors'  room." 
Here  are  received  a  daily  average  of  two  thousand 
reports  sent  by  the  different  companies  and  giving 
detailed  particulars  of  perhaps  fifteen  hundred  new 
fires.  These  reports  are  "edited" — examined  for  er- 
rors that  the  trained  eye  quickly  catches — by  a  force 
of  six  editors,  and  then  either  sent  back  to  the  com- 
panies for  correction  or  forwarded  to  another  de- 
partment. The  various  processes  by  which  they  are 
classified,  copied,  recorded,  and  filed  under  claim- 
ant's names,  as  well  as  by  geographical  location,  are 
too  complicated  to  detail.  The  most  modern 
methods  of  differentiated  colors  and  key-numbers  are 
employed.  For  example,  one  of  the  departments 
receives  twelve  thousand  white  cards  and  prepares 
twenty-four  thousand  pink  and  green  cards  per  week, 
in  addition  to  about  twenty-six  hundred  of  what  are 
known  as  fire-marshal  cards  to  comply  with  the  re- 
quirements of  certain  states.  By  the  spring  of  191 6, 
the  files  contained  some  two  and  one-quarter  million 
cards  and  were  growing  rapidly. 

[155] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

What  value  have  these  cards?  For  one  thing, 
they  constitute  such  a  check  on  fraud  as  has  never 
existed  before.  In  one  recent  case,  for  instance,  a 
man  carried  policies  in  two  companies,  telling  each 
that  it  was  the  sole  insurer.  This  statement  was  part 
of  the  information  on  the  loss-cards  that  came  from 
the  two  companies  when  the  man  had  a  fire  and  put 
in  his  claim.  Neither  company  knew  of  the  other's 
interest  and  the  man  would  have  received  twice  the 
amount  of  his  loss  had  it  not  been  for  the  methods 
of  the  Actuarial  Bureau,  where  both  claims  were 
recorded  and  compared  under  the  same  name  and  ad- 
dress. As  a  result,  a  criminal  attempt  was  thwarted. 
In  another  case,  a  man  had  three  fires  in  two  months; 
in  the  first  month,  his  insurance  was  with  one  set  of 
companies,  and,  in  the  second,  with  a  different  set. 
All  of  these  companies  reported  to  the  bureau  where 
the  lines  crossed  and  the  fraud  was  at  once  detected. 
These  are  characteristic  cases  for  this  form  of  crim- 
inality which  is  extensively  tried.  The  bureau  will 
make  it  more  difficult  of  successful  accomplishment, 
and,  in  this  way  alone,  should  make  the  large  ex- 
pense of  its  maintenance  pay  for  itself. 

This  is,  of  course,  directly  in  the  interest  of  the 
public  as  well  as  of  the  insurance  companies,  for 
the  successful  incendiary  merely  picks  the  pockets  of 
the  honest  policy  holders.  The  Actuarial  Bureau's 
work,  in  this  respect,  might  well  come  under  the 
heading  of  fire  prevention  work  on  its  moral  side, 
for  as  the  records  accumulate  with  time,  they  should 

[156] 


PRESENT  PHASES  OF  THE  WORK 

constitute   a   practically   complete   register   of    fire- 
claim  swindlers. 

But  even  this  important  service  is  secondary  to  the 
larger  task  of  interpreting  insurance  experience, 
through  collecting,  classifying,  and  tabulating  its 
statistics.  In  this  way,  it  is  expected  that,  in  time, 
fairly  accurate  tables  of  loss-costs  may  be  obtained 
upon  all  classes  of  risks,  and  these  will  be  available 
as  a  basis  for  greater  accuracy  in  rating.  To  this 
end,  the  bureau  makes  use  of  the  marvelous  tabulat- 
ing and  calculating  machinery  which  have  been  so 
often  described  but  which  never  cease  to  cause 
wonder.  Machinery  for  transcribing  the  detailed 
information  from  a  card  into  a  series  of  perforations 
in  parallel  columns,  machinery  for  checking  the  ac- 
curacy of  these  records  by  flashing  red  lights  when 
any  error  is  made,  machinery  for  separating  hun- 
dreds of  cards  in  a  few  seconds  into  any  desired  clas- 
sification, machinery  for  absorbing  long  columns  of 
figures  and  setting  down  totals  with  unfailing  ac- 
curacy— all  of  these  are  busily  employed,  with  steady 
click  and  rattle,  like  superhuman  mathematical 
monsters  with  untiring  mechanical  brains,  doing 
work  which  would  otherwise  require  a  small  regi- 
ment of  accountants.  It  is  largely  by  means  of  this 
mechanical  assistance  that  it  is  becoming  possible  to 
publish  analytical  reports  for  each  state  as  well  as 
for  the  country  at  large. 

As  already  set  forth,  this  large  activity  is  a  new 
development.     In  December,   1913,  Mr.   Richards, 

[157] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

then  vice-president,  called  the  attention  of  the  Ex- 
ecutive Committee  to  the  apparent  purpose  of  some 
of  the  state  insurance  departments  to  demand  of  the 
companies  classified  data  of  their  state  experience  in 
premiums  and  losses,  to  obviate  which  the  companies 
should  themselves  undertake  the  work  for  the 
broader  field  of  the  United  States;  thus  obtaining 
every  possible  advantage  from  such  statistical  data, 
which  would  constitute  a  basis  for  more  accurate 
schedule  rating  than  had  heretofore  been  possible. 
At  the  following  annual  meeting  an  "Actuarial 
Committee"  was  constituted,  and,  in  September,  the 
State  Fire  Marshals'  Association  and  the  National 
Convention  of  Insurance  Commissioners  passed  reso- 
lutions in  which  they  strongly  commended  the  pro- 
ject, and  pledged  their  support. 

Accordingly,  on  October  29,  19 14,  at  a  special 
meeting  called  for  the  purpose  and  largely  attended, 
the  National  Board  voted  to  establish  the  Actuarial 
Bureau,  in  charge  of  a  standing  committee  to  be 
known  as  the  Actuarial  Bureau  Committee,  and  to 
begin  the  tabulation  of  losses  from  January  i,  1915. 

It  was  recognized  from  the  start  that  the  proposed 
work  would  have  a  value  beyond  the  actual  member- 
ship of  the  board  itself,  and  provision  was  made  for 
inviting  companies  outside  of  board  membership  to 
join  the  Actuarial  Bureau.  More  than  one  hundred 
such  companies,  both  stock  and  mutual,  have  availed 
themselves  of  this  privilege;  the  total  membership 

[158] 


ABOUT  TO  START  FOR  A  GREAT  CONFLAGRATION 


of    approximately    2000    claims. 


THE    GEXliRAL    OFFICE    AND     SOME    MEMBERS     OF     THE     GEXEKAL 
MANAGER'S  STAFF 


A      CORN  I  R      OF      THE      QUARTER>      i  m-       I  1 1  h       it'MAlillKE      U.\       FIRE 

PRE\  ENTIOX 

In  the  center  are  some  of  the  engineers  engaged  in  studying  the  reports  and  maps 
sent  in  by  the  field  parties,  and  on  the  rigiit  is  the  draltsnian  pre[iaring  a  map  for 
reproduction  in  one  of  the  city  reports. 


PRESENT  PHASES  OF  THE  WORK 

of  the  bureau  amounts  to  two  hundred  and  thirty-six 
companies. 

THE  GENERAL  MANAGER 

With  two  additions  the  foregoing  are  the  principal 
lines  of  activity  that  occupy  the  attention  of  the  Na- 
tional Board.  They  would  seem  to  contradict  the 
fears  of  some  of  the  underwriters  in  the  '70's  and 
'8o's  that  nothing  could  be  found  for  the  board  to 
do  if  control  of  rates  and  commissions  were  removed 
from  its  jurisdiction,  for  few  busier  organizations 
are  to  be  found  the  country  over.  At  the  head  of  all 
these  complex  activities  sits  the  general  manager, 
Wilbur  E.  Mallalieu,  who,  with  his  immediate  staff, 
is  responsible  for  the  conduct  of  every  department. 
In  the  last  analysis  the  success  or  failure  of  the  board's 
activities  is  largely  a  personal  matter  with  the  general 
manager.  The  various  company  executives  who 
compose  the  National  Board  are  busy  men  in  their 
own  organizations,  and  can  give  but  a  limited  amount 
of  time  to  committee  work,  but  emergencies  cannot 
wait  upon  committee  meetings;  they  require  im- 
mediate attention.  This  devolves  upon  the  general 
manager,  as  does  the  task  of  coordinating  the  work 
of  the  various  committees  and  bureaus,  of  anticipat- 
ing business  needs  before  they  arise,  and  of  furnish- 
ing the  great  variety  of  special  reports  and  lines  of 
service  called  for  by  members  of  the  National  Board. 
He  is  in  attendance  at  every  meeting  of  every  com- 

[159] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

mittee.  It  is  his  duty  to  formulate  the  business  for 
consideration  and  to  present  the  necessary  data.  He 
is  directly  charged  with  the  responsibility  of  the  large 
force  of  employees,  and  the  board's  finances  are  under 
his  immediate  supervision. 

In  a  single  day,  the  general  manager,  in  addition 
to  the  conduct  of  the  normal  business  of  all  depart- 
ments, may  have  to  be  present  at  one  or  more  impor- 
tant committee  meetings.  With  forty  or  more  legis- 
latures in  session,  he  may  be  acting  as  intermediary 
betw^een  the  Law  Committee  chairman  in  New  York 
and  counsel  in  several  state  capitals,  shaping  his 
activities  according  to  numerous  telegrams  regarding 
the  progress  of  legislation.  He  may  be  called  upon 
by  telephone  or  telegraph,  for  hurried  information, 
and  must  give  daily  attention  to  important  corre- 
spondence from  many  sources  respecting  the  work  of 
any  one  of  the  eleven  standing  committees.  Mr. 
Mallalieu  is  disinclined  to  enlarge  upon  his  own 
functions  beyond  saying  that  it  is  his  duty  to  see  that 
the  board  renders  service;  but  his  work,  practically 
unknown  to  the  general  public,  nevertheless  is  in 
effect  that  of  a  public  office  and  its  quiet  efficiency 
has  a  value  that  is  felt  far  beyond  insurance  circles. 

Two  great  lines  of  outside  work  in  which  the  Na- 
tional Board  is  largely  interested,  the  Underwriters' 
Laboratories  and  the  National  Fire  Protection  As- 
sociation, are  reserved  for  special  mention  in  the 
chapters  that  follow.  The  board  is  also  a  contrib- 
uting member  to  the  Insurance  Library  of  Boston. 

[i6o] 


PRESENT  PHASES  OF  THE  WORK 

This  is  the  world's  largest  repository  of  under- 
writing records  and  other  forms  of  fire-insurance 
literature.  Under  the  direction  of  Mr.  D.  N. 
Handy,  the  librarian,  it  is  rendering  important  serv- 
ice to  the  insurance  business,  and  a  complete  set  of 
its  analytical  catalog-cards  is  to  be  found  at  National 
Board  headquarters. 


[i6i] 


XV 

FIRE  PREVENTION  TO-DAY 

ON  Riverside  Drive,  in  New  York  City,  stands 
a  handsome  Firemen's  Monument,  dedi- 
cated to  the  "Soldiers  in  a  War  that  Never 
Ends."  There  seems  to  be  an  irresistible  temptation 
for  using  military  similes  in  discussing  the  struggle 
of  mankind  with  fire  destruction ;  it  is  an  ancient  war, 
antedating  the  dawn  of  human  history;  it  is  universal 
and  unending,  knowing  neither  peace  nor  truce;  its 
consumption  of  life  and  property  is  terribly  severe. 
America,  priding  herself  upon  her  peaceful  ideals, 
is,  nevertheless  the  world's  chief  battle-ground  in  the 
war  with  Fire,  and  the  struggle  has  been,  on  the 
whole,  a  losing  one  for  the  nation.  There  are  some 
reasons,  however,  for  believing  that  the  present  may 
be  the  moment  of  turning,  and  that  the  future  record 
may  be  one  of  gain.  Time  alone  can  make  this  cer- 
tain, but  should  this  prove  to  be  the  case,  no  small 
share  of  the  credit  will  be  due  to  the  National  Fire 
Protection  Association. 

The  magnitude  of  America's  fire-waste  has  often 
been  stated  with  due  emphasis,  but  the  public 
consciousness  does  not  begin  to  grasp  the  full  import 
of  the  fact.     How  many  people,  for  example,  realize 

[162] 


FIRE  PREVENTION  TO-DAY 


that,  in  1914,  the  city  of  Chicago  alone  had  a  total 
of  12,447  separate  fires,  or  more  than  five  to  every 
thousand  of  its  inhabitants,  and  that  such  small  cities 
as  Montgomery,  Alabama  (population  47,000),  and 
Brockton,  Massachusetts  (population  66,000),  aver- 
aged nearly  two  fires  daily  throughout  the  year? 
Underwriters  were  alarmed  when,  in  1865,  American 
fire-losses  reached  a  total  of  $40,000,000,  but  there 
has  been  but  one  year  since  1905  when  the  figures 
failed  to  exceed  $200,000,000;  the  annual  average 
approximating  $250,000,000.  As  already  stated 
(Chapter  XII)  this  country's  direct  and  indirect 
fire-tax  exceeds  the  value  of  its  total  production  of 
gold,  silver,  copper  and  petroleum.  How  can  any 
civilization  regard  itself  complacently  when  it  allows 
a  largely  preventable  evil  to  devour  a  sum  in  material 
wealth  equal  to  four  of  its  largest  resources?  In 
1908,  the  United  States  Geological  Survey  published 
figures  showing  the  fire-tax  to  be  greater  than  the 
entire  value  of  the  real  property  and  improvements 
in  any  of  the  following  states:  Maine,  West  Virginia, 
North  Carolina,  North  Dakota,  South  Dakota,  Ala- 
bama, Louisiana,  or  Montana.  Think  of  feeding 
an  entire  state  to  the  flames  each  year!  The  same 
report  expressed  the  belief  that  four-fifths  of  this 
vast  expense  was  preventable;  that  with  proper 
building  construction  there  might  be  saved  "nearly 
enough  to  build  a  Panama  Canal  each  year." 

These  are  merely  "statistics";  here  is  the  way  in 
which  the  subject  was  visualized  by  Mr.   Charles 

[163] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Whiting  Baker,  editor  of  the  Engineering  News, 
New  York,  in  an  address  before  the  national  en- 
gineering societies  on  "Conservation  of  Natural 
Resources,"  March  24,  1909: 

The  buildings  consumed,  if  placed  on  lots  of  65  feet 
frontage,  would  line  both  sides  of  a  street  extending 
from  New  York  to  Chicago.  A  person  journeying  along 
this  street  of  desolation  would  pass  in  every  thousand 
feet  a  ruin  from  which  an  injured  person  was  taken.  At 
every  three  quarters  of  a  mile  in  this  journey  he  would 
encounter  the  charred  remains  of  a  human  being  who 
had  been  burned  to  death. 

If  this  distressing  statement  represented  an  un- 
avoidable condition  of  human  existence  it  would  be 
the  duty  of  the  American  people  to  bear  it  with  as 
much  fortitude  as  possible.  But  unfortunately  for 
the  national  pride,  this  is  not  the  case;  a  comparison 
with  European  countries  in  times  of  peace  is  humili- 
ating to  that  national  sense  of  pride.  Why,  it  may 
be  asked,  should  the  191 3  loss  in  American  cities  be 
$2.25  per  inhabitant,  while  that  in  France  was  but 
$0.49;  in  England,  $0.33;  in  Germany,  $0.28;  in 
Italy  and  Austria,  $0.25;  in  Switzerland,  $0.15;  and 
in  thrifty  little  Holland,  only  $0.11?  Why  should 
the  19 1 3  losses  of  Chicago  exceed  $5,500,000  and 
those  of  Vienna,  a  city  of  similar  size,  run  to  only 
$300,000?  Why  should  "exposure"  hold  a  foremost 
place  among  American  fire-causes,  while  the  city  of 
Vienna  has  never  known  a  case  in  which  a  fire  has 

[164] 


FIRE  PREVENTION  TO-DAY 


Spread  from  one  building  to  another?  These  ques- 
tions are  insistent  and  persistent,  and  the  answer  to 
them  puts  us  all  the  more  to  shame  because  we  possess 
the  finest  fire-fighters  in  the  world;  without  such 
fighters  the  humiliating  differences  would  be  even 
greater.  It  cannot  be  denied,  in  the  light  of  these 
comparisons,  that  fires  may  be  prevented,  nor  that 
one  of  the  most  pressing  duties  of  American  civiliza- 
tion is  to  free  itself  from  the  reproach  of  carelessness 
and  laxity  in  these  matters.  To  aid  in  bringing  this 
about  is  the  work  of  the  National  Fire  Protection 
Association. 

To-day  this  association  includes  in  its  list  of  one 
hundred  and  twenty-nine  active  members  the  names 
of  forty-one  professional  and  trade  organizations, 
many  of  them  having  a  nation-wide  influence,  and 
covering  almost  every  conceivable  field  of  activity 
concerned  with  the  prevention  of  fire. 

The  work  was  inaugurated  by  underwriters,  in  a 
large  measure  by  those  who  were  members  of  the  Na- 
tional Board,  but  the  original  stimulus  came  from  a 
Non-Board  source. 

Back  in  1835,  ^  number  of  New  England  mill- 
owners,  under  the  leadership  of  Zachariah  Allen, 
formed  the  first  of  the  "factory  mutuals";  that  is  to 
say,  they  undertook  to  provide  joint  insurance  upon 
their  combined  properties.  Immediately  it  became 
apparent  that  fires  meant  assessment,  and  this  fact 
stimulated  an  earnest  study  of  means  for  reducing — 
assessments.     It  was   an   affair  of   the  pocketbook; 

[165] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

and  with  this  impelling  motive  the  mill-owners  be- 
gan to  make  discoveries  and  to  apply  them.  Better 
methods  of  construction  were  devised  and  fire-fight- 
ing devices  were  installed,  but  the  chief  contribution 
of  the  "mutuals"  was  the  introduction  of  the  auto- 
matic sprinkler,  the  most  effective  weapon  in  the 
whole  arsenal  of  Fire  Protection.  An  indoor  fire 
starting  in  a  small  way,  as  such  fires  do,  would  cause 
a  column  of  heated  air  to  rise  to  the  ceiling  where  it 
would  melt  the  soft-metal  seal  of  a  ceiling  sprinkler, 
and  thus  a  stream  of  water  would  pour  directly  down 
upon  the  flames.  Thus,  fires  became  their  own  fire- 
men. It  soon  became  apparent  that  mills  thus 
equipped  were  comparatively  free  from  losses,  and 
the  movement  toward  efficient  fire  protection  received 
a  great  impetus. 

The  National  Board,  when  it  was  not  discussing 
rates  and  commissions,  for  some  time  had  been  deal- 
ing with  the  subject  in  a  more  or  less  general  and 
desultory  way,  but  in  1896  a  group  of  technically 
educated  men  in  the  ranks  of  the  stock  companies, 
stimulated  by  the  object  lesson  of  the  "mutuals," 
formed  an  organization  with  the  prevention  of  fires 
as  its  exclusive  purpose,  and  thus  the  National  Fire 
Protection  Association  was  born. 

The  new  association  began  at  once  to  formulate 
engineering  standards.  The  first  was  for  the  instal- 
lation and  use  of  automatic  sprinklers,  and  this  was 
followed  by  regulations  for  the  protection  of  open- 
ings in  walls  and  partitions,  for  fire-pumps,  signal- 

[166] 


PRACTICAL  LESSONS   IX    CUNSTRUCTIUX 

1.  A  frame  factory  partly  protected  by  a  fire-wall  in  the  Salem  conflagration.  The 
exposed  end  was  aestio^cd,  but  the  hre  was  stopped  by  the  viail.  2.  This  eighteen- 
story  building  was  burned  out  as  a  result  of  the  tire  in  the  foreground.  Had  it  been 
equipped  with  wire  glass  windows,  it  probably  would  have  sustained  little  damage. 
3.   Automatic   sprir.klers   would   l.a\e   prevented   this   fire. 


now  CARELESSNESS   CAUSES  FIRES 

1.  The  deadly  combination  of  defective  chimney  and  shingle  roof  is  responsible  for 
thousands  of  fires  every  year.  2.  Many  hves  and  niucli  property  are  sacrificed  to  the 
propensity  of  children  for  playing  with  matches.  3.  The  open  gas  jet  is  dangerous 
in  a  house,  particularly  when  it  is  near  to  woodwork.  4.  Carelessly  thrown  cigarette 
or  cigar  butts  cause  numberless  fires.  5.  The  strike-anywhtre  match  has  been  called 
"the  greatest  modfrn  criminal."  6.  This  is  an  example  of  bad  cellar  conditions; 
inflammable   material   is   in    perilous   pro.ximity   to   the    furnace. 


FIRE  PREVENTION  TO-DAY 


ing  systems,  hose,  hydrants,  gravity  and  pressure- 
tanks  and  a  long  line  of  similar  devices.  Being  a 
voluntary  dues-paying  organization,  it  had  no  funds 
for  printing  and  distributing  these  standards,  and  for 
this  most  necessary  object  the  National  Board  as- 
sumed the  expense.  For  twenty  years,  the  board  has 
continued  to  adopt  these  standards  officially,  and  dis- 
tribute them  without  charge  among  all  who  are  in- 
terested in  applying  them  to  local  conditions.  The 
circulation  has  been  very  large,  running  as  high  as 
four  hundred  thousand  copies  in  a  year,  and  the  ex- 
pense has  in  consequence  been  considerable. 

The  N.  F.  P.  A.  was  full  of  energy  and  devotion^ 
and,  in  its  somewhat  academic  way,  it  felt  well  satis- 
fied with  its  efforts  toward  the  reduction  of  fire- 
waste  until  about  five  or  six  years  ago  when  there 
came  a  rude  awakening.  Some  one  arose  in  one  of 
its  meetings  and  called  attention  to  the  fact  that  the 
fire-waste  was  not  being  reduced — that,  on  the  con- 
trary, it  was  increasing  rapidly.  This  caused  anxious 
thought.  The  association  knew  that  it  had  worked 
out  the  physical  standards  which  would  curtail  this 
waste — if  applied.  Failure  to  decrease  the  waste 
indicated  failure  to  apply  the  standards  on  the  part 
of  the  public.  The  people  of  the  nation  had  not 
yet  been  aroused  to  the  urgency  of  the  situation. 
Some  one  must  assume  the  important  and  most 
necessary  task  of  arousing  them.  Who?  Obviously 
the  body  which  had  studied  the  extent  of  the  fire- 
waste,   which   had  worked   out  the   standards,    and 

[167] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

which  knew  how  easily  they  might  be  applied.  In 
other  words,  the  National  Fire  Protection  Associa- 
tion had  had  a  burden  laid  upon  it  in  its  very  name; 
it  now  saw  the  necessity  for  adding  a  course  in 
human  engineering  to  its  already  established  work  in 
mechanical  and  structural  engineering. 

The  daily  newspaper  seemed  to  be  the  most  natural 
means  for  reaching  the  public.  Accordingly  the  is- 
suance of  press-bulletins  was  undertaken  as  an  initial 
step.  These  were  confidently  posted  to  the  papers 
throughout  the  country,  and  the  good  work  was  be- 
lieved to  be  well  under  way.  A  few  days  of  anxious 
searching  of  newspaper  columns  ensued  and  then 
an  unwelcome  truth  was  forced  upon  the  officials  of 
the  association;  the  valuable  bulletins  had  been  con- 
signed to  waste-paper  baskets  by  editors  who  knew  as 
little  about  fire-peril  as  did  their  readers;  in  all  the 
United  States  the  Boston  Herald  alone  showed  signs 
of  interest.  Thus,  it  appeared  that  the  first  necessity 
was  to  discover  means  to  arouse  the  editors  them- 
selves. 

Secretary  Franklin  H.  Wentworth  was  fortunately 
a  man  of  resources.  He  sought  the  cooperation  of 
an  organization  which  had  the  ear  of  all  newspapers 
— the  National  Association  of  Credit  Men.  This 
body  included  the  credit  men  of  most  of  the  large 
national  and  local  advertisers  of  the  United  States; 
it  had  a  committee  on  fire  insurance,  and  it  had  be- 
come an  active  member  of  the  N.  F.  P.  A.  More- 
over, it  had  local  branches  in  every  city  of  impor- 

[i68] 


FIRE  PREVENTION  TO-DAY 


tance  from  Boston  to  San  Diego.  Its  secretary, 
Charles  E.  Meek,  entered  heartily  into  Mr.  Went- 
worth's  plans  for  a  nation-wide  speaking-tour  and 
arranged  for  local  branches  to  hold  their  monthly 
meetings  on  successive  dates  in  adjacent  cities.  Then 
the  two  secretaries  started  on  a  veritable  ''whirlwind" 
speaking  campaign. 

There  ensued  a  series  of  credit-men's  dinners 
throughout  the  country.  Reporters  were  on  hand  at 
every  feast;  a  meeting  representative  of  the  cities' 
leading  business  firms  possessed  news-value  which 
a  purely  abstract  subject  might  not  possess.  Thus 
was  learned  that  first  great  lesson  of  publicity: 
translate  the  abstract  into  the  concrete.  Messrs. 
Wentworth  and  Meek  made  rousing  speeches  and 
startled  their  hearers  with  an  array  of  facts;  more 
than  this,  they  drove  home  the  lesson  of  individual 
responsibility  in  each  community.  The  effect  was 
electrical.  The  credit  men  appointed  local  fire  pre- 
vention committees  to  work  upon  the  municipal 
authorities;  the  city  officials  were  deeply  impressed, 
and  the  newspapers  became  wide-awake  in  a  mo- 
ment. 

The  two  secretaries  were  well  supplied  with  pre- 
pared material  which  they  left  with  the  credit  men 
to  be  given  to  the  newspapers  while  they  rushed  on 
to  another  city.  During  January,  February,  and  part 
of  March,  191 1,  these  enthusiastic  and  devoted  pio- 
neers were  almost  constantly  on  the  move,  traveling 
during  the  day  and  speaking  evening  after  evening, 

[169] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

leaving  behind  them  a  broadening  trail  of  aroused 
public  interest. 

By  this  means,  the  N.  F.  P.  A.  successfully 
launched  its  propaganda.  A  similar  speaking  tour 
was  arranged  the  following  year  by  the  American 
Institute  of  Architects.  The  architects  themselves 
greatly  needed  the  gospel  of  fire  prevention  to  be 
preached  to  them,  and,  in  some  respects,  this  second 
tour  was  equally  fruitful  in  results.  As  in  the  case 
of  the  credit  men,  there  were  invited  to  the  local 
meetings  of  the  architects  at  which  the  subject  of  fire- 
waste  was  to  be  discussed,  mayors,  councilmen,  fire- 
chiefs,  directors  of  Public  Safety,  engineers,  and  rep- 
resentatives of  Boards  of  Trade,  commercial  clubs 
and  similar  bodies.  The  Canadian  Manufacturers 
Association  also  booked  a  tour  in  cooperation  with 
the  Canadian  club.  Thus,  in  two  years,  the  atten- 
tion of  the  entire  continent  was  successfully  directed 
to  the  impoverishing  effect  of  fire-waste  upon  the 
country,  and  the  time  became  ripe  for  making  cer- 
tain radical  suggestions  for  fire  prevention. 

Besides  urging  upon  all  towns  the  official  adoption 
and  application  of  National  Board  standards,  the  N. 
F.  P.  A.  addressed  itself  to  certain  specific  tasks. 
One  of  these  was  the  standardization  of  the  hose- 
couplings  and  hydrant-fittings  of  the  various  cities. 
This  may  sound  academic  and  technical;  actually  it 
concerns  the  safety  of  human  lives  and  the  preserva- 
tion of  untold  property  values.  A  few  years  ago,  all 
the  summer  cottages  at  famous  Old  Orchard  Beach, 

[170] 


FIRE  PREVENTION  TO-DAY 


Maine,  were  swept  away  by  a  conflagration.  En- 
gines from  near-by  Portland  were  hurried  to  the 
scene  and  found  themselves  helpless  to  aid;  their 
hose-couplings  would  not  fit  the  local  hydrants. 
They  were  forced  to  stand  idly  by  during  the  de- 
struction. With  mechanism,  skill,  and  water-supply 
all  available,  there  lacked  only  the  slight  matter  of 
standardized  couplings,  but  the  lack  was  fatal. 
When  Baltimore  was  on  fire  in  1904,  engines  and 
firemen  were  sent  by  train  from  New  York  but  could 
be  used  only  on  the  water-front  for  the  same  reason. 
Should  the  highly  inflammable  structures  along  At- 
lantic City's  "Board  Walk"  be  swept  by  flame,  Phila- 
delphia is  the  only  large  city  that  could  respond  in 
time  to  be  of  valuable  service,  but  Philadelphia's 
fire-engines  could  not  be  connected  with  Atlantic 
City's  hydrants.  This  astounding  condition  of  varia- 
tion in  couplings  is  wide-spread  at  the  present  time. 
In  Columbus,  Ohio,  the  chief  of  the  Fire  Department 
has  organized  a  special  association  for  standardizing 
hose-couplings  within  a  radius  of  fifty  miles,  and 
some  other  communities  have  taken  the  matter  up, 
but  a  large  part  of  the  country  is  still  imperiling  lives 
and  property  by  oflicial  apathy  in  this  important 
matter. 

Another  movement  which  has  recently  received 
considerable  impetus  is  the  establishment  of  "Fire- 
Prevention  Day"  in  various  cities  and  states,  in  order 
that  attention  may  be  fixed  and  instruction  given  in 
this  vital  subject;  likewise  the  creation  of  an  office 

[171] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

of  Fire  Prevention  in  various  city  governments. 
Although  this  latter  idea  had  been  taken  up  with 
success  by  progressive  fire  departments  in  some  of 
the  smaller  cities,  it  was  not  until  191 1  that  a  fire- 
prevention  bureau  was  established  in  New  York 
city.  In  the  same  year  an  ordinance  was  passed  in 
Cincinnati,  empowering  the  Chief  of  the  Fire  De- 
partment to  inspect  buildings  and  premises  and  order 
correction  of  dangerous  conditions.  The  employ- 
ment of  the  uniformed  force  of  the  fire  department 
for  making  inspections  worked  out  so  well  in  Cin- 
cinnati that  it  was  adopted  in  New  York  a  little  over 
a  year  ago.  Fire  Commissioner  Adamson  had 
prophesied  that  it  would  be  possible  to  bring  about  a 
decrease  of  one  thousand  in  the  number  of  fires  in 
the  city  in  a  year;  the  actual  decrease  was  1002  for 
1915.  A  large  part  of  the  credit  for  this  showing 
should  go  to  the  uniformed  section  of  the  force  which 
made  one-and-a-half  million  inspections  during  the 
year. 

Boston  furnishes  a  good  example  of  this  brand- 
new  municipal  function  in  operation.  The  fire-loss 
of  "The  Hub"  had  been  excessively  high  for  many 
years,  averaging  $3.61  per  capita  during  each  year  of 
the  decade  preceding  the  appointment  of  Fire-Pre- 
vention Commissioner  O'Keefe  in  the  fall  of  1914. 
The  new  commissioner  was  given  jurisdiction  over 
the  entire  Metropolitan  District,  including  twenty- 
five  adjacent  towns.  The  figures  tell  their  own  story; 
there  was  a  reduction  of  1405  in  the  number  of  fire- 

[172] 


FIRE  PREVENTION  TO-DAY 


alarms  for  the  first  nine  months  of  191 5  (excluding 
March),  as  compared  with  the  same  period  in  1914; 
and  a  comparative  reduction  of  $983,858  in  property 
loss  for  the  first  seven  months  of  the  year.  To  put 
it  in  another  way,  there  was  an  actual  saving  effected 
for  every  man,  woman,  and  child  of  $1.20,  and  the 
work  of  the  Fire  Prevention  Department  was  done 
at  a  cost  of  but  one  and  a  half  cents  per  capita  for  the 
year.  A  profit  of  nearly  10,000  per  cent,  might  well 
be  considered  a  good  municipal  investment. 

To-day,  the  organized  and  regular  inspection  of 
property  by  uniformed  firemen  is  coming  into  popu- 
larity in  many  places,  but  there  are  still  some  of 
the  "old-school"  chiefs  and  commissioners  who  feel 
that  the  duty  of  a  fireman  is  to  respond  to  alarms — 
and  to  play  checkers  between  times.  Progressive 
firemen  are  now  fighting  the  fire  before  it  starts. 
Where  the  system  is  in  operation,  firemen  are  sup- 
posed to  become  familiar  with  every  building  in 
their  districts,  and  to  look  for  all  evidences  of  fire 
hazard.  These  may  be  exposed  gas-jets,  badly  ar- 
ranged heating-devices,  accumulations  of  rubbish 
under  stairways,  obstructed  fire-escapes,  or  number- 
less other  conditions  of  danger.  The  timely  glance 
of  a  trained  eye  often  may  avert  disaster. 

Several  years  ago,  the  country  place  of  a  New 
York  millionaire,  at  Mineola,  Long  Island,  was 
burned.  The  fire  had  spectacular  features  which 
caused  wide  comment,  but  perhaps  the  most  interest- 
ing feature  was  one  that  is  known  but  to  few  people. 

[173] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

In  the  course  of  the  afternoon  preceding  the  night 
of  the  fire,  a  man  who  had  been  trained  as  a  fire  engi- 
neer called  upon  the  manager  of  the  estate  in  regard 
to  business  unconnected  with  his  profession.  Quite 
by  accident  he  chanced  to  see  the  heating  system  of 
the  house  and  at  once  recognized  it  as  highly  unsafe. 
He  told  the  manager  that  the  house  might  burn  down 
at  any  minute,  and  so  impressed  the  latter  with  the 
danger  that  he  engaged  the  engineer  to  come  during 
the  following  week  to  work  out  plans  of  safety.  The 
engagement  was  never  kept,  for  the  predicted  fire 
broke  out  within  the  next  few  hours  and  the  house  was 
destroyed.  Similarly,  potential  fires  exist  unrecog- 
nized in  scores  of  thousands  of  places. 

Another  value  of  inspection  is  to  make  firemen 
familiar  with  the  premises  where  they  may  be  called 
upon  to  fight  fire,  a  possible  m^atter  of  life  or  death 
when  battling  in  smoke-filled  passageways.  A  few 
years  ago,  a  captain  in  the  New  York  city  Fire  De- 
partment was  killed  by  falling  down  an  unknown  air- 
shaft;  his  body  was  not  found  until  the  firemen,  hours 
afterward,  in  breaking  through  a  wall,  discovered  the 
shaft.  Previous  inspection  would  have  given  the 
captain  a  knowledge  of  the  existence  of  this  shaft. 

The  N.  F.  P.  A.  has  especially  advocated  a  law 
to  fix  individual  responsibility  for  fires.  This  point 
suggests  one  of  the  reasons  why  Europe  is  more  im- 
mune than  America.  There  are  some  countries 
which  do  not  accept  the  ^'didn't  know  it  was  loaded" 
excuse  in  the  matter  of  fires.     If  a  man  has  a  fire 

[174] 


FIRE  PREVENTION  TO-DAY 


which  spreads  to  his  neighbor's  property,  he  may 
find  himself  assessed  with  the  cost  of  the  neighbor's 
loss  as  well  as  his  own ;  he  may  even  find  himself  be- 
hind prison  bars.  Innocent  intention  is  not  an  ac- 
ceptable defense  if  he  has  failed  to  take  proper  pre- 
cautions, and  the  burden  of  proof  is  on  him.  This 
sometimes  works  individual  hardship,  even  injustice, 
but  it  makes  for  public  safety,  which  is,  after  all,  a 
matter  of  more  importance. 

In  the  United  States,  on  the  other  hand,  a  fire  with 
heavy  loss  of  life  may  cause  a  brief  excitement;  the 
words,  "criminal  carelessness"  may  be  used  in 
editorials,  and  there  may  even  be  an  indictment. 
But  when,  months  afterward,  the  case  comes  to  trial, 
absence  of  criminal  intent  will  be  urged  in  defense 
and  acquittal  will  follow  as  a  matter  of  course. 
Criminal  carelessness,  the  undoubted  cause  of  some  of 
our  greatest  disasters,  amounts  almost  to  a  legal  fic- 
tion. The  European  system  enforced  in  this  coun- 
try would  work  miraculous  results  in  saving  life  and 
property. 

For  a  final  point,  the  National  Fire  Protection  As- 
sociation aims  to  bring  fire  prevention  home  to  the 
mass  of  the  public  by  encouraging  specific  education. 
Recently  a  lecturer  in  one  of  our  largest  cities  was 
discussing  fire  hazard.  Before  him  on  the  table 
rested  a  sample  of  the  city's  fire-alarm  box.  In  the 
course  of  his  talk,  he  invited  any  of  his  audience  to 
come  forward  and  illustrate  the  method  of  sending  in 
an  alarm;  no  one  stirred,  and  it  developed  that  none 

[175] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

of  them  possessed  that  knowledge.  Stationed  at  the 
back  of  the  hall  were  several  policemen,  and  the  lec- 
turer next  requested  one  of  them  to  come  forward. 
To  his  surprise,  they  grinned  sheepishly  and  stole  out 
of  the  door.  Investigation  proved  that  they  were 
as  ignorant  as  the  audience.  The  city  was  fully 
equipped  with  efficient  fire-alarm  boxes,  whose  use 
at  some  time  of  excitement  might  be  a  matter  of  great 
importance,  yet  the  human  factor  was  lacking — both 
public  and  police  were  untrained. 

One  of  the  most  terrible  fires  in  New  York's  his- 
tory was  that  of  the  Windsor  Hotel.  At  the  time  of 
its  outbreak,  the  negro  chef  of  a  wealthy  woman, 
living  on  the  opposite  corner,  chanced  to  glance  out 
of  the  window  and  saw  an  unfamiliar  wisp  of  smoke 
curling  about  the  familiar  hotel  cornice  across  the 
way.  Dropping  everything,  he  hurried  into  the  hotel 
lobby  and  tried  to  tell  the  clerk  what  he  had  seen,  but 
that  dignitary  abruptly  ordered  him  from  the  build- 
ing. Somewhat  crestfallen,  he  returned  to  his  work. 
A  few  minutes  later,  he  glanced  again  at  the  cornice 
and  this  time  distinctly  saw  flames;  he  therefore  re- 
turned prepared  to  insist.  As  he  approached  the 
second  time,  the  cry  of  fire  came  from  inside  the 
building  and  a  messenger  was  despatched  to  turn  in 
an  alarm.  This  messenger,  in  his  excitement  and 
ignorance,  rushed  past  a  fire-box  and  attempted  to 
send  an  alarm  from  a  near-by  letter-box.  In  all,  so 
much  time  was  lost  that  the  Fire  Department  was 
unable  to  prevent  a  shocking  loss  of  life. 

[176] 


FIRE  PREVENTION  TO-DAY 


In  January,  1916,  the  elevator-boy  in  a  New  York 
apartment-house  discovered  fire  in  the  middle  of  the 
night  and  had  the  presence  of  mind  to  rush  at  once 
to  an  alarm-box.  This  he  opened  and  then  returned 
to  the  task  of  getting  out  the  tenants,  not  knowing  that 
the  simple  act  of  opening  a  box  did  not  send  in  an 
alarm.  It  was  not  until  an  alarm  was  sent  by  another 
person  that  the  department  responded.  There  are 
countless  other  instances.  Ignorance  as  well  as  care- 
lessness takes  heavy  toll  of  life  and  property;  and  the 
day  may  come  when  it  shall  be  recognized  as  crim- 
inal ignorance. 

The  complete  banishment  of  these  foes  may  not 
be  achieved  by  the  present  generation,  but  systematic 
efforts  are  being  exerted,  steady  progress  is  being 
made,  and  the  day  is  foreshadowed  when  the  occur- 
rence of  fires,  save  under  extraordinary  conditions, 
shall  be  regarded  as  inexcusable.  This  is  the  millen- 
nium toward  which  the  new-style  underwriter  is 
eagerly  pressing,  and  his  rates  are  gladly  adjusted 
to  every  indication  of  lessening  risk. 


[177] 


XVI 

A  VISIT  TO  THE  UNDERWRITERS' 
LABORATORIES 

A  YEAR  or  two  ago  an  English  tourist  sought 
the  president's  office  at  207  East  Ohio  Street 
in  the  city  of  Chicago.  "I  have  been  told," 
he  said,  "that  the  two  most  interesting  points  in 
Chicago  are  the  stock-yards  and  the  Underwriters' 
Laboratories."  He  was  allowed  to  inspect  the  latter 
remarkable  institution  and  left  with  the  feeling  that 
his  informant  should  have  named  the  Laboratories 
first. 

There  is  no  parallel  to  this  institution  in  all  the 
world.  One  might  pass  its  unassuming  front  without 
suspecting  that  behind  the  rows  of  quiet  windows, 
Science  is  waging  the  war  of  Civilization  with  Fire. 
It  wears  a  dignified,  rather  academic  air,  yet  the  in- 
tensely practical  nature  of  its  activities  has  nothing 
of  the  abstract  in  it.  It  is  a  first  line  of  defense  for 
the  protection  of  the  American  people.  It  does  not 
exist  for  the  purpose  of  fighting  fires,  or  even  for  the 
removal  of  hazards;  it  seeks  to  prevent  the  creation 
of  hazards — and  has  prevented  them  in  countless 
thousands  of  cases.  It  is  probably  not  going  too  far 
to  state  that  human  life  is  safer  and  property  more 
secure  in  every  community  throughout  the  country 

[178] 


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THE  OFFICE  OF  THE  PRESIDENT 

The  l^nderwriters  Laboratories  are  housed  in  perhaps  the  most  completely  fire-resistent 
building  in  the  world.     This  office  is  a  demonstration  of  the  artistic  possibilities  of  this 

form   of  construction. 


HOSE  TEST 

The  picture  shows  the  Chief  of  the  Chicago  Fire  Prevention  Bureau  witnessing  a 
bur-;ling-pressure  test  of  samples  of  rubber-lined  fire  hose.  The  bursting  point  is 
indicated  on  the  gauge.  Tests  on  fire  hose  also  include  elongation  and  warping  tests, 
chemical  and  physical  tests  to  guard  against  labeling  rubber  compounds  not  giving 
promise  of  long  life,   suitable  tests  of  hose  jackets,  etc. 


THE  UNDERWRITERS'  LABORATORIES 

because  of  the  powerful  though  unrecognized  in- 
fluence that  emanates  from  East  Ohio  Street.  All  of 
which  remains  to  be  proved. 

First,  however,  it  is  well  to  recognize  that  the  Fire 
War  differs  from  mankind's  other  struggles  in  what 
may  be  termed  its  universal  latency.  Fire  possibili- 
ties exist  on  every  hand ;  they  are  found  in  the  most 
unthought-of  places.  It  is  natural  to  associate  fire 
hazard  with  a  box  of  matches,  but  who  would  look 
for  it  in  a  glass  of  water?  Yet  potassium  or  sodium 
thrown  into  water  bursts  at  once  into  flame,  while  a 
few  drops  of  water  upon  gray,  rocklike  calcium  car- 
bid  produce  explosive  acetylene  gas.  Many  fires 
have  been  caused  by  water.  Fire  is  continually 
originating  in  the  most  unexpected  ways — by  a  sun- 
beam chancing  to  fall  upon  a  telescope  standing 
amid  loose  papers,  by  the  spark  from  an  accidental 
hammer-blow  in  a  room  containing  gasoline  fumes, 
even  by  the  well-meant  action  of  a  hospital  nurse  in 
oiling  the  body  of  a  live-steam  victim  and  covering 
him  with  blankets — in  this  case,  spontaneous  com- 
bustion cost  the  life  of  the  patient.  When  furniture 
manufacturers  introduced  forced-draft  ventilators  to 
draw  the  fine  wood  dust  from  their  machines  into  a 
receiving  chamber,  the  thought  of  fire  hazard  was 
far  from  their  minds,  yet  disastrous  blazes  have  re- 
sulted from  this  source.  Explosions  of  dust  in  flour- 
mills  are  well  known.  The  kiln-drying  process  for 
lumber  has  been  a  prolific  fire-cause. 

Invention  is  a  constant  hazard;  new  devices  and 

[179] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

processes  are  continually  introducing  elements  of  the 
greatest  danger.  This  already  has  been  noted  in  the 
case  of  electricity,  but  equally  striking  is  that  of  the 
internal-combustion  engine,  which  made  practical 
the  automobile  and  the  motor-boat  It  found  gaso- 
line a  mere  by-product  and  left  it  a  universally  useful, 
universally  dangerous  commodity,  serving  mankind 
in  the  most  important  ways  but  causing  innumerable 
fires.  The  versatile  but  highly  inflammable  celluloid 
is  another  case  in  point.  There  is  also  a  lacquer  used 
in  shoe  manufacturing  and  known  to  the  trade  as 
"dope";  it  is  prepared  from  celluloid  scrap  and  its 
use  in  a  wooden  shed  was  the  starting  point  of  the 
thirteen-million-dollar  Salem  conflagration  in  1914. 
The  giant  new  industry  of  moving  pictures  was  not 
generally  supposed  to  be  hazardous  until  disastrous 
fires  and  serious  loss  of  life  resulted  from  it.  There 
is  a  well-recognized  fire-hazard  in  incubators,  in 
curling-irons,  in  rain-coat  manufacture,  in  various 
polishing,  cleaning,  and  sweeping  compounds,  and  in 
countless  other  products  and  processes. 

The  celebration  of  holidays  is  a  factor  of  no  small 
importance.  The  fire-record  of  the  Fourth  of  July 
is  too  familiar  to  need  discussion,  but  underwriters 
realize  that  Christmas  with  its  Christmas-tree  candles, 
its  tinsel  and  its  cotton  snow  is  a  constant  source  of 
danger.  So  also,  is  the  Jewish  custom  of  burning 
candles  in  religious  observances,  and  the  Roman 
Catholic  use  of  lighted  candles  about  the  dead. 

With  the  daily  use  of  fire  for  purposes  of  cookery, 

[180] 


THE  UNDERWRITERS'  LABORATORIES 

lighting,  heating,  commerce,  industry,  art,  science,  or 
pleasure  by  almost  every  individual  in  every  com- 
munity; with  sparks  borne  by  the  winds  from  smoke- 
stacks and  chimneys;  with  barns  and  houses  burned 
by  lightning;  with  the  omnipresent  commercial  elec- 
tricity always  ready  to  transform  itself  into  fire 
through  some  defect  in  transmission,  and  with  fire 
hazard  lurking  unseen  in  the  incessant  stream  of  de- 
vices emanating  from  the  busy  brains  of  our  inven- 
tors, there  can  be  small  wonder  that  appalling  de- 
struction marks  the  pathway  of  man's  most  useful 
servant.  It  has  been  regarded  as  an  unavoidable 
wage  for  indispensable  service;  the  work  of  the  Un- 
derwriters' Laboratories  is  directed  toward  a  vast 
reduction  in  the  wage  and  a  notable  increase  in  the 
service.  When  this  fact  is  realized,  it  will  be  seen 
that  the  world  has  a  great  stake  in  the  far-reaching 
but  unostentatious  work  now  being  conducted  by  the 
fire-insurance  profession  in  the  interests  of  civi- 
lization as  a  whole — practically  altruistic  work 
undertaken — from  an  altruistically  practical  mo- 
tive. 

With  these  facts  in  mind,  a  visit  to  the  laboratories 
is  an  education.  An  interesting  note  is  struck  at  the 
moment  of  entrance  and  maintained  throughout;  it 
is  that  of  the  possibilities  of  beauty  in  fire-proof  con- 
struction. This  Chicago  plant  is  perhaps  the  most 
completely  fire-proof  building  in  America;  with  the 
exception  of  the  chairs,  no  wood  is  used  in  construc- 
tion or  furnishing,  yet  the  treatment  of  brick,  metal, 

[i8i] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

concrete,  and  tile  is  delightfully  artistic.  This  is 
particularly  evident  in  the  office  of  President  Merrill, 
who  explains  that  it  is  intended  as  an  object  lesson 
to  architects  and  builders  to  correct  the  general  im- 
pression that  the  use  of  wood  is  necessary  in  a  beauti- 
ful interior.  He  calls  attention  to  the  fact  that  in- 
stead of  concealing  poor  masonry  under  mahogany 
wainscoting  and  paneling,  an  equally  agreeable  re- 
sult may  be  secured  by  the  use  of  good  masonry  that 
needs  no  concealment.  The  steel  doors,  windows, 
and  trim  represent  a  somewhat  larger  original  invest- 
ment, but  this  is  soon  counterbalanced  by  the  saving 
in  maintenance,  it  being  unnecessary  to  call  in  carpen- 
ters for  readjustments  or  repairs.  In  other  words  the 
use  of  fire-proof  interiors  justifies  itself  both  artis- 
tically and  economically. 

This,  however,  is  merely  incidental;  the  building  is 
essentially  a  place  of  activity,  and  the  happenings 
that  take  place  on  its  forty-five  thousand  square  feet 
of  floor-space  are  probably  as  diverse  and  as  interest- 
ing as  may  be  found  under  any  one  roof  in  America. 
Its  hundred  employees  are  not  a  force  of  workmen 
but  a  staff  of  highly  qualified  experts.  The  expen- 
sive plant  is  not  a  money-making  institution,  but  an 
investment  by  Insurance  in  the  science  of  protection 
from  fire.  Its  chief  financial  support  is  obtained 
from  the  National  Board,  under  whose  general  direc- 
tion the  work  is  carried  on.  Specifically,  its  purpose 
is  that  of  furnishing  exact  knowledge  on  the  "merits 
of  appliances,  devices,  machines,  and  materials  in  re- 

[182] 


THE  UNDERWRITERS'  LABORATORIES 

spect  to  life,  and  fire  hazards,  and  accident  preven- 
tion." 

To  this  building,  therefore,  come  the  thousands 
of  products  of  hundreds  of  manufacturers — a  layman 
wonders  to  see  how  many  different  kinds  of  things 
are  directly  or  indirectly  involved  with  the  fire-ques- 
tion— and  there  they  are  put  through  a  series  of  the 
most  exacting  tests,  by  means  of  scientific  apparatus 
and  under  the  eyes  of  trained  experts. 

For  example,  the  quality  of  fire-hose  may  be  a  mat- 
ter of  life  or  death;  some  years  ago  at  the  Parker 
Building  fire  in  New  York,  it  was  a  matter  of  death 
to  many,  for  a  number  of  lengths  burst  under  pres- 
sure of  the  water.  Poor  hose  may  look  all  right, 
since  the  essential  rubber  tube  is  covered  with  fabric. 
Some  fire  chiefs  claim  that  they  can  test  rubber  ''by 
chewing  it."  President  Merrill  has  a  standing  offer 
of  twenty-five  thousand  dollars  per  year  for  a  scien- 
tifically accurate  "chewer" ;  it  would  be  worth  that 
amount  by  enabling  the  laboratories  to  dispense  with 
expensive  apparatus  and  save  valuable  time.  It  is 
needless  to  add  that  the  offer  has  never  yet  been 
claimed.  In  the  mean  time  a  more  painstaking 
method  is  pursued.  Standardized  samples  of  rubber 
are  taken  from  the  hose  and  placed  in  a  stretching 
machine,  which  slowly  and  steadily  draws  them  out, 
longer  and  longer,  thinner  and  thinner  until — snap! 
the  strain  has  been  too  great.  This  exact  point  is 
noted  on  the  scale  by  the  watching  inspector;  it  shows 
the  elasticity  of  the  rubber.     In  another  room  is  a 

[183] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

quantitative  test  of  sulphur  content;  here  shredded 
rubber  is  treated  for  its  chemical  reactions.  Against 
the  wall  is  a  remarkable  battery  of  electrical  ovens 
where  rubber  is  consumed  under  delicately  regulated 
heat  for  the  ash-test.  These  tests  show  precisely  how 
the  rubber  is  made,  and  therefore  how  long  it  should 
last.  Manufacturers'  claims  or  firemen's  tastes  are 
of  small  account  when  the  voice  of  Science  has 
spoken.  So  delicate  are  some  of  these  tests  that  the 
exact  position  of  the  crucible  in  the  oven  shows  in  the 
results.  For  a  final  process,  a  length  of  hose  is  sub- 
jected to  an  increasing  water-pressure  until  finally 
it  is  compelled  to  burst,  and  this  point  is  indicated 
by  a  gage.  A  manufacturer  whose  hose  can  satisfy 
the  laboratories  need  have  no  fear  of  the  test  of 
service. 

Defective  insulation  developed  in  a  Brooklyn 
home,  and  a  whole  family  was  burned  to  death; 
thus  the  quality  of  insulation  is  another  of  the  life- 
or-death  questions  of  our  day.  Many  samples  of 
covered  wire,  accordingly,  are  received  at  East  Ohio 
Street  for  inspection,  and  special  apparatus  has  been 
invented  for  this  one  purpose.  It  includes  devices 
for  removing  the  braid  and  for  separating  the  fabric 
from  the  rubber,  a  scratch-wheel  to  remove  all  traces 
of  the  impregnating  compound,  rollers  to  strip  the 
rubber  from  the  wire,  and  other  rollers  to  grind  it 
into  shreds  for  the  chemical  and  ash  tests.  There  is 
a  micrometer  microscope  for  determining  the  thick- 
ness of  the  rubber  and  a  dial  micrometer  for  showing 

[184] 


THE  UNDERWRITERS'  LABORATORIES 

the  thickness  of  the  braid;  the  temperature  of  all 
tests  is  carefully  prescribed.  All  of  this  ingenious 
and  expensive  trouble  to  pass  upon  insignificant  bits 
of  wire — is  it  really  worth  while?  Yes,  for  the  wire 
is  the  channel  for  civilization's  life-force. 

Most  fires  are  traceable  to  matches.  These  omni- 
present bits  of  wood  carry  with  them  a  tremendous 
responsibility.  Some  one  has  said  that  the  "strike- 
anywhere"  match  is  the  greatest  of  modern  criminals. 
It  is  interesting  to  watch  the  test  to  determine  whether 
the  product  of  some  manufacturer  is  worthy  to  bear 
the  laboratories'  standard  label.  A  miniature  device 
like  a  tiny  pile-driver  drops  a  weight  upon  the  head 
of  match  after  match ;  many  of  the  unlabeled  matches 
ignite  and  hence  are  unsafe,  while  those  from  the 
labeled  boxes  remain  intact.  The  labeled  matches 
also  burn  without  an  afterglow  and  without  dropping 
their  heads.  A  breaking  device  shows  the  quality 
of  the  wood.  The  fallen  end  of  a  brittle  match  may 
flare  underfoot  and  cause  a  fire.  All  of  these  possi- 
bilities are  considered  in  making  the  tests. 

There  are  many  rooms  in  the  building.  They  are 
filled  with  complicated  apparatus  and  occupied  by 
inspectors  who  are  so  intent  upon  their  tests  that  they 
give  slight  notice  to  visitors;  the  whole  effect  is  one 
of  concentrated  attention.  One  of  them  is  following 
the  operation  of  an  automatic  machine  that  will  turn 
on  and  ofif  any  electrical  switch  or  socket  known  to 
the  market.  There  is  a  whirring  of  gears,  a  snapping 
of  switches  and  a  flashing  of  bulb-lights,  all  having 

[185] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

their  meaning  to  the  inspector's  eye.  Another  is  ex- 
perimenting with  a  gas  for  use  in  welding  that  has 
been  proclaimed  as  being  safer  than  acetylene;  the 
test  does  not  seem  to  bear  out  the  claim,  although  the 
manufacturer  may  have  been  sincere  enough,  since 
his  facilities  for  testing  were  probably  inferior  to 
those  here  employed. 

Sometimes  the  manufacturers  are  mightily  sur- 
prised. One  of  them  felt  such  confidence  in  the  non- 
explosive  qualities  of  his  particular  preparation  that 
he  offered  to  stand  by  the  generator  with  a  lighted 
cigar.  The  inspector,  wise  with  the  experience  of 
many  tests,  firmly  vetoed  the  cigar,  but  finally  per- 
mitted the  enthusiast  to  stand  by  the  machine.  To 
his  consternation,  the  bell  of  the  generator  presently 
soared  to  the  ceiling  with  a  bang,  and  he  was  covered 
from  head  to  foot  with  the  sludge.  A  sadder  and 
wiser  manufacturer  retired  to  clean  his  clothes  and 
observed  that  apparently  there  was  "only  one  way  in 
which  a  d fool  could  learn  anything." 

Electrical  stoves  are  found  in  many  kitchens. 
Here  is  a  stove  being  put  through  its  paces.  The 
manufacturer  claims  that  it  will  automatically  shut 
off  the  current  at  the  danger-point,  but  when  the  in- 
spector allows  current  to  continue  until  the  heat- 
danger  point  is  reached  the  shut-off  fails  to  work; 
the  insulation  burns  and  sparks  fall  on  the  testing- 
table.  In  a  kitchen  such  an  occurrence  might  cause 
a  fire;  it  is  wiser  to  learn  this  fact  in  the  laboratory. 

Such  diverse  devices  as  pop-corn  machines,  auto- 

[i86] 


STUDYING   MKK  HAZARD 

The    countless   materials    used    in    the    arts   and    industries    are    tested    for   their    various 
degrees  of  fire  hazard  by  scientifically  trained   inspectors.  various 


ADJUSTIXG  THE  SWITCH  AND  SOCKET  TESTING  M\CHIXE 


^^^^^^^^B 

m 

ft 

1 

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1 

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1 

■■■■■^       If^^^ 

RUBBER  STRENGTH  AND  STRETCH  TEST 

The  quality  of  rubber  in  a  fire  hose  may  be  a  matter  of  life  or  death  in  an  emergency. 
This  machine  is  one  of  the  devices  for  obtaining  exact  knowledge  on  the  subject  before 
the   fires  occur.      A   strip  of  rubber  taken   from   the   hose   is  here  shown  being  stretched 

by   an   inspector,   who   measures   its   exact   breaking   point. 


\'.\]'OR   EXPLOSION  TEST 

In  one  corner  of  the  Chemical  Laboratory  a  test  is  being  made  for  explosive  properties. 
This   is    the    way   in    which    accidental   explosions    may   be    obviated. 


THE  UNDERWRITERS'  LABORATORIES 

matic  photographing  machines,  dentists'  appliances, 
and  countless  other  things  are  being  examined.  The 
tests  in  these  cases  consist  in  physical  inspection  for 
defects  that  the  inspector's  trained  eye  has  led  him 
to  suspect,  and  then  in  operating  under  the  most  un- 
favorable conditions  which  would  be  met  with  in 
actual  use.  The  fool  will  never  be  eliminated  from 
society;  safety  can  be  found  only  in  "fool-proof"  de- 
vices. Appliances  in  endless  variety  are  being  manu- 
factured, bought  and  inexpertly  used  by  people  who 
are  intelligent  or  stupid,  careful  or  careless  as  the  case 
may  be.  The  intelligent,  careful  man  may  at  any 
time  be  endangered  by  the  carelessness  or  stupidity 
of  a  neighbor.  From  this,  the  work  of  the  labora- 
tories furnishes  his  greatest  protection. 

Some  of  the  tests  are  not  without  spectacular  fea- 
tures; among  these  are  those  with  roofing.  One  of 
the  many  makes  of  composition  shingle-roofing  is 
applied  to  a  sloping  framework  like  a  steeply  pitch- 
ing roof,  and  there  is  literally  "tried  by  fire."  In 
use,  it  might  receive  the  heat  radiation  from  some 
neighboring  blaze  without  being  actually  subjected 
to  flame  or  sparks.  Accordingly,  a  big  drum-shaped 
burner  to  radiate  heat  is  lowered  from  the  ceiling  and 
made  to  glow  above  the  sample  of  the  roofing  for  a 
specified  number  of  minutes.  If  no  bad  results  are 
observed,  the  protection  from  radiation  is  sufficient. 
The  next  test  is  more  searching.  Suppose  that  the 
roof  were  attacked  by  actual  flame,  suppose  that  the 
flame  were  driven  by  a  gale;  this  might  happen  in  a 

[187] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

conflagration  and  the  safety  of  the  house  would  de- 
pend upon  a  genuinely  fire-proof  roof.  The  inspec- 
tors do  not  speculate  upon  the  roof's  qualities;  they 
find  these  out  by  producing  a  conflagration  and  gale 
to  order.  For  this  purpose,  the  sample  is  pushed 
forward  to  the  opening  of  a  huge  blower-duct,  the 
jets  of  a  burner  are  lighted,  and  the  wind-machine 
is  set  for  forty-five  miles  an  hour.  There  is  a  roar, 
and  a  mass  of  flame  leaps  from  the  opening  to  strike 
upon  the  roofing  with  such  intensity  that  even  the 
inspectors  shrink  back.  The  composition-shingles, 
in  this  case,  are  unable  to  stand  the  test;  almost  im- 
mediately they  begin  to  curl  and  ignite.  That  is  the 
answer ;  they  would  do  this  in  a  conflagration.  Their 
final  appearance  is  recorded  by  means  of  a  camera. 

In  another  room  there  is  a  test  in  progress  to  de- 
termine whether  a  new  form  of  ''thimble"  for  con- 
necting a  stove-pipe  with  a  chimney  will  afford  the 
proper  protection.  The  stove-pipe,  under  the 
forced  draft  of  a  gas  flame,  soon  glows  cherry-red  and 
after  a  definite  time,  the  woodwork  behind  the  thim- 
ble is  examined  to  see  if  it  be  injured.  It  is  found 
to  be  slightly  charged.  The  inventor  has  been  stand- 
ing by;  he  looks  disappointed,  but  says  that  the  show- 
ing is  better  than  the  last  time.  It  develops  that  he 
has  made  considerable  changes  in  the  device  within 
the  past  few  weeks  because  repeated  tests,  here  made 
for  him,  have  shown  him  its  defects.  He  pays  a  fee 
for  the  tests,  but  the  valuable  advice  of  the  inspec- 
tors is  his  without  charge.     Manufacturers  often  re- 

[i88] 


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PAXELTKSTIXG     FURNACE 

A  great  fire  would  not  present  severer  conditions  than  does  this  furnace,  which  is  used 
for  fire  tests  of  various  sorts  of  building  materials,  such  as  brick,  wired  glass,  wired- 
glass  windows,  metal  fire  doors,  metal-clad  fire  doors,  etc.  In  testing  a  hre  door,  for 
example,  the  door  is  installed  in  a  portable  brick  wall,  which,  by  means  of  an  overhead 
trolley  or  crane,  is  moved  into  the  furnace.  Here  one  side  of  the  door  is  exposed 
to  gas  flames,  uniformly  over  its  entire  surface,  and  the  temperature  is  raised  to  2000 
degrees  Fahrenheit.  At  the  end  of  an  hour  the  door  is  withdrawn  and  subjected 
to  the  impact  of  a  standard  hose  stream.     The  photograph  shows  the  rear  of  the  furnace. 


TESTIXG  WITH    .\   HOSK   STREAM 


After  coming  from  the  Panel-Testing  l-'urmce,  the  heated  door,  window  or  other 
test  subject  is  frtijuently  subjected  to  the  impact  of  a  fire-hose  stream.  This  condition 
might   be   met   with    during   a   fire. 


THE  UNDERWRITERS'  LABORATORIES 

ceive  the  greatest  help.  One  man  who  had  paid  a 
thousand-dollar  test-fee  said  that  he  would  not  take 
twenty-thousand  for  the  benefit  derived. 

There  is  a  special  contrivance  for  submitting  fire- 
doors  and  fire-windows  to  the  intense  heat  of  a  con- 
flagration. In  some  cases  the  glowing  door  is  taken 
from  the  furnace  and  subjected  to  the  full  force  of  a 
fire-stream.  Such  conditions  might  arise  in  a  real 
emergency,  and  the  inspectors  must  make  sure  of  what 
would  happen.  Formerly  the  conflagrations  them- 
selves were  the  sole  laboratories  for  severe  tests; 
builders  and  underwriters  could  only  theorize  until 
the  catastrophe  showed  them  whether  they  were  right 
or  wrong.     Now  they  are  eliminating  guesswork. 

Especially  is  this  true  in  the  case  of  the  forthcom- 
ing column  test,  for  which  a  thirty-thousand-dollar 
apparatus  is  now  in  course  of  preparation.  The 
buckling  of  several  steel  columns  under  great  heat 
and  the  pressure  of  upper  stories  may  ruin  a  million- 
dollar  office-building.  The  encasing  of  the  column 
and  its  construction  have  therefore  been  the  subject 
of  much  debate,  which  soon  will  be  settled  by  exact 
knowledge,  for  a  mighty  combination  of  furnace  and 
hydraulic  press  will  make  it  possible  to  produce  any 
desired  amount  of  pressure  at  any  given  degree  of 
heat. 

Every  known  form  of  column  and  covering  has 
already  been  collected.  In  this  unprecedented  test, 
the  Federal  government,  the  National  Board  and  the 
Mill  Mutuals  are  sharing  the  expense. 

[189] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

In  one  section  is  the  great  hydraulic  laboratory 
for  testing  valves,  pumps,  couplings,  hydrants, 
sprinklers,  and  other  devices  of  this  general  class. 
It  is  filled  with  appliances  for  delivering  volume,  pro- 
ducing pressure,  or  creating  any  desired  test-condi- 
tion. And  herein  an  interesting  precaution  is  taken 
— water  isn't  merely  water;  it  is  fresh  water,  salt 
water,  clear  water,  muddy  water,  alkaline  water,  soft 
water,  and  what  not.  A  valve  or  a  pump  might  work 
perfectly  with  the  clear  Lake  Michigan  water  of 
Chicago,  but  give  trouble  with  the  more  substantial 
fluid  used  by  St.  Louis  or  Cincinnati,  and  it  is  always 
to  be  remembered  that  such  trouble  might  be  a  serious 
matter  in  a  fire  emergency.  The  hydraulic  labora- 
tory, therefore,  has  facilities  for  producing  imitation 
Mississippi  River  water  or  any  other  kind  that  has 
to  be  reckoned  with.  This  is  an  example  of  the 
intensely  practical,  non-academic  methods  pur- 
sued. 

One  test  In  progress  in  the  far  corner,  reveals  an- 
other interesting  fact;  it  is  being  conducted  by  a  squad 
of  students  from  the  Armour  Institute  of  Technology 
under  the  direction  of  their  instructor,  a  trained  fire- 
prevention  engineer.  A  good  deal  of  this  class-work 
is  carried  on  in  the  laboratories  with  the  cordial  co- 
operation of  the  management.  It  brings  in  addi- 
tional skilled  assistance  without  expense,  and  it  aids 
in  training  more  engineers  for  the  "Cause."  In  this 
case,  the  value  of  a  window-sprinkler  is  being  deter- 
mined, and  a  number  of  receptacles  are  carefully 

[190] 


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THE  UNDERWRITERS'  LABORATORIES 

placed  to  show  the  exact  distribution  of  the  sprinkled 
water. 

So  much  for  a  brief  and  superficial  survey  of  the 
tests,  although  their  extent  has  scarcely  been  indi- 
cated. There  still  remains  the  important  point  of 
making  the  results  of  these  tests  efifective  by  improv- 
ing conditions  out  in  the  world  where  the  fire-hazard 
occurs.  This  is  largely  done  by  means  of  labels. 
Take,  for  example,  the  single  matter  of  fire-hose. 
The  campaign  so  long  waged  by  the  National  Board, 
the  National  Fire  Protection  Association,  and  asso- 
ciated bodies  has  called  the  attention  of  cities  and 
private  users  to  the  importance  of  having  hose  that 
will  assure  safety.  Something  better  than  manufac- 
turers' claims  being  required,  thorough  tests  are 
made,  as  already  described,  and  then  to  all  makes  of 
hose  that  have  proved  their  worth  is  affixed  the  label 
of  the  Underwriters'  Laboratories.  The  more  im- 
portant users  of  fire-hose  to-day  insist  upon  being 
furnished  with  ''labeled"  hose,  and  thus  take  no 
chance  with  its  quality.  They  know  that  the  tests 
are  rigid  and  impartial,  that  they  are  not  subject  to 
influence  or  prejudice,  and  that  the  one  requirement 
for  any  manufacturer  is  that  he  be  able  to  meet  the 
exacting  standards  demanded  of  him. 

This  same  condition  afifects  extinguishers,  wires, 
electric  fans,  fire-doors,  matches,  metal-polish,  or  any 
other  of  the  myriad  subjects  of  investigation;  in  each 
case  it  is  a  question  of  "test  and  label"  and  fifty  mil- 
lion Underwriters'  Laboratories  labels  were  affixed  in 

[191] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

19 1 5.     That  is  why  this  institution  actually  extends  a 
powerful  protective  influence  throughout  the  country. 

The  Chicago  plant  is  supplemented  by  seventy- 
seven  other  offices  in  the  United  States,  six  in  Cana- 
dian cities,  and  one  in  London,  England.  A  staff 
of  field-men  is  maintained  because  much  of  the  work 
must  be  done  in  various  factories.  The  detail  of  this 
organization  is  somewhat  highly  complicated;  that 
it  should  work  so  efficiently  is  a  tribute  to  the  genius 
for  organization  of  President  W.  H.  Merrill,  since 
it  has  been  largely  worked  out  by  him. 

Not  only  are  there  constant  tests  in  the  laboratories 
of  goods  sent  by  the  manufacturers,  but  similar  goods 
are  regularly  purchased  in  the  open  market  for  check- 
tests  and  the  laboratories'  engineers  go  to  many  fac- 
tories for  inspection  and  to  label  or  otherwise  mark 
standard  goods.  The  manufacturers  pay  for  inspec- 
tion and  labels  at  prices  so  low  that  they  rarely  affect 
the  cost  of  the  goods.  There  is,  of  course,  nothing 
compulsory  about  this;  no  manufacturer  need  submit 
to  the  inspection  unless  he  desire,  but  he  finds  suffi- 
cient motive  in  the  selling  advantage  of  the  label ;  it 
is  becoming  increasingly  difficult  to  dispose  of  un- 
labeled goods  to  important  customers.  The  standard 
is  widely  recognized  and  respected. 

But  what  of  the  manufacturers  of  the  country — 
do  they  cooperate?  Their  general  attitude  is  one 
of  the  most  encouraging  features  of  the  entire  project. 
Their  early  suspicions  having  been  disarmed  by  the 
efficiency  and  impartiality  of  the  laboratories'  inspec- 

[192] 


THE  UNDERWRITERS'  LABORATORIES 

tions,  they  have  shown  a  really  enthusiastic  spirit  of 
cooperation.  Instances  of  opposition  or  bad  faith  are 
becoming  so  rare  that  the  inspectors  tell  of  them  as  a 
farmer  would  tell  of  a  two-headed  calf.  In  one  in- 
stance a  manufacturer  presented  some  goods  to  the 
inspectors  and  when  they  were  approved  and  labeled, 
he  removed  the  labels  and  used  them  upon  an  in- 
ferior grade  of  the  same  material.  He  then  returned 
the  first  lot  of  goods  and  the  process  was  repeated. 
The  inspectors  grew  suspicious  and  privately  in- 
itialed the  samples.  The  next  time  the  same  goods 
made  their  appearance  the  initials  revealed  the  fraud, 
and  approval  was  immediately  withdrawn  from  the 
manufacturer.  In  course  of  time,  he  desired  to  re- 
instate himself  and  was  told  that  it  would  be  necessary 
for  him  to  maintain  two  of  the  laboratories'  inspec- 
tors in  his  factory.  Thus  the  price  of  his  deceit  out- 
weighed any  possible  advantage. 

In  another  instance  a  railroad  called  for  bids  upon 
a  large  number  of  fire-extinguishers  and  specified  that 
they  must  bear  the  laboratories'  inspection-label. 
The  bids  received  were  fairly  uniform  with  the  ex- 
ception of  one,  which  was  far  below  the  others. 
This  aroused  suspicion,  and  the  railroad  communi- 
cated with  President  Merrill,  who  advised  an  order 
of  a  sample  hundred,  and  at  once  sent  an  inspector 
to  the  factory  to  see  them  made.  The  first  few  were 
passed  as  satisfactory,  and  then  the  inspector  was  told 
that  the  plant  had  been  shut  down  for  boiler  repairs. 
He  refused  to  leave,  however,  and  waited  for  the 

[193] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

work  to  recommence.  After  several  weeks,  in  which 
repeated  efforts  were  made  to  persuade  the  inspector 
to  take  his  departure,  the  manufacturer  threw  up  the 
order,  admitting  thereby  dishonest  intention. 

But  such  cases  as  these  are  merely  the  exceptions 
that  prove  the  rule.  Most  manufacturers  are  glad 
to  cooperate  with  the  laboratories,  and  they  show  an 
appreciation  of  the  assistance  rendered  in  maintain- 
ing high  standards.  They  are  always  notified  when 
these  tests  are  to  be  made,  and  frequently  are  present 
at  them.  The  laboratories'  officials  now  aim  to 
throw  a  larger  measure  of  responsibility  upon  the 
factory,  so  that  the  manufacturer  shall  send  for  test 
only  such  goods  as  are  already  satisfactory  to  him. 
If,  after  claiming  that  he  has  tested  his  own  goods 
and  has  discarded  everything  falling  below  the 
standard,  the  manufacturer  can  be  shown  that  the 
standard  so  established  is  still  defective,  the  moral 
stimulus  is  very  great.  The  entire  purpose  of  the 
institution  is  thus  to  get  away  from  merely  academic 
view-points  of  commercial  values.  It  is  run  by  the 
National  Board  at  a  large  annual  deficit,  but  it  en- 
joys the  very  general  good-will  of  the  manufacturers. 

Within  the  past  several  years,  an  ingenious  demerit 
system  has  been  devised.  Like  a  country-school 
"spell-down,"  this  has  the  never-failing  interest  of 
competition.  The  manufacturers  in  any  given  line 
are,  metaphorically  speaking,  stood  up  in  a  row  and 
tested  in  order  to  see  who  shall  go  to  the  head  of  the 
class,  and  who  to  its  foot.     This  is  accomplished  by 

[194] 


THE  UNDERWRITERS'  LABORATORIES 

demerits  charged  against  their  goods.  The  percen- 
tages of  failures  of  total  tests  are  figured  for  three- 
month,  six-month,  and  twelve-month  periods,  and 
sheets  are  sent  out  to  all  the  manufacturers  showing 
results;  the  manufacturing  plants  are  designated  by 
letters,  each  man  knowing  his  own  letter  but  not  that 
of  his  neighbor,  and  the  letters  are  frequently 
changed.  A  manufacturer  can  thus  readily  see 
whether  he  is  gaining  or  losing  in  the  contest — not 
for  orders  but  for  perfection.  Interest  is  keen,  and 
results  have  been  really  notable.  Indeed,  the  whole 
atmosphere  of  the  institution  tends  to  raise  one's  faith 
in  human  nature. 

The  origin  of  the  Underwriters'  Laboratories  may 
be  traced  back  to  1893  when  W.  H.  Merrill,  a  young 
electrician,  came  to  Chicago  to  serve  the  Chicago 
Underwriters'  Association  in  inspecting  the  electrical 
installations  at  the  World's  Fair.  He  had  the  labora- 
tory idea  so  much  in  mind  that  it  became  an  obses- 
sion, and  finally  he  obtained  the  necessary  insur- 
ance support  to  open  a  tiny  testing-room  over  the 
stable  of  the  Salvage  Corps.  It  was  equipped  with 
a  bench,  a  table,  some  electrical  measuring  instru- 
ments, and  a  few  chairs;  the  force  consisted  of  three 
men.  The  quality  of  the  testing  work  began  to  at- 
tract attention  outside  of  the  Middle  West,  and  soon 
the  National  Board  decided  to  make  an  appropria- 
tion for  it.  The  Underwriters'  Electrical  Bureau,  as 
it  was  first  called,  now  became  the  Electrical  Bureau 
of  the  National  Board. 

[195] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

During  the  next  few  years,  the  work  was  broad- 
ened to  include  other  branches  of  fire-prevention  and 
fire-protection  engineering.  In  November,  1901,  the 
bureau  was  incorporated  as  the  Underwriters'  Lab- 
oratories, and,  in  1904,  having  outgrown  a  two-story 
building  on  East  Twenty-first  Street,  land  was  se- 
cured on  East  Ohio  Street  for  the  present  plant, 
which  has  been  several  times  enlarged.  Supplemen- 
tary offices  have  since  been  opened  in  many  cities. 
The  number  of  employees  has  increased  from  three 
to  three  hundred,  and  the  work  now  covers  the  United 
States  and  Canada,  with  some  business  in  England, 
Germany,  and  France.  The  annual  budget  is 
$300,000. 

As  is  perhaps  inevitable  in  an  institution  of  such 
vitality,  the  work  is  broadening  into  another  al- 
truistically practical  field  and  has  begun  to  give  at- 
tention to  the  correlative  subject  of  safety-appliances; 
all  of  the  apparatus  in  the  laboratories  is  equipped 
with  devices  to  guard  against  accident. 

This,  then,  is  a  hasty  passing  glimpse  at  the  hap- 
penings behind  the  unassuming  rows  of  windows  in 
the  dignified,  rather  academic-looking  building  of 
East  Ohio  Street, 


[196] 


XVII 

FIRE  INSURANCE  IN  ITS  RELATION  TO  THE 
POLICY-HOLDER 


A' 


"  Ji  LTER  Alterius  Onera  Portate''—''Be^r  ye 
one  another's  burdens";  this  is  the  former 
motto  of  the  Ne^v  York  State  Insurance 
Department.  This,  too,  is  the  essence  of  the  prin- 
ciple of  fire  insurance  with  one  very  important 
amendment — mutual  helpfulness  is  made  workable 
and  permanent  by  being  put  upon  a  business  basis. 
Waves  of  altruism  are  generally  emotional  and  spas- 
modic; they  are  beautiful  but  short-lived.  Civiliza- 
tion takes  a  forward  step  whenever  altruistic  action 
is  freed  from  emotionalism  and  made  self-sustaining. 
It  has  been  shown  that  fire-waste  is  among  the 
greatest  afflictions  of  the  American  people,  which 
means,  of  course,  that  an  enormous  number  of  in- 
dividuals suffer  personal  loss  from  fire.  If  "Amer- 
ica" suffered  a  $221,000,000  fire  loss  in  1914,  it  was 
because  John  Smith  lost  $300,  William  Jones  lost 
$2700,  and  Henry  Brown  lost  $85,000,  together  with 
a  sufficient  number  of  others,  all  individuals,  to  make 
up  the  total.  In  many  instances  this  loss  would  mean 
ruin  if  outside  assistance  were  not  rendered,  and, 
throughout  the  world's  history,  until  within  the  last 
few  generations,  private  charity  has  been  the  only 

[197] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

source  of  relief.  The  hardship  of  such  a  situation 
needs  no  comment.  Insurance  at  last  brought  an  in- 
teresting principle  into  play — the  mere  multiplica- 
tion of  fire-losses  made  possible  the  relief  of  each  in- 
dividual loser  by  establishing  a  basis  of  averages. 
Note  the  distinction:  when  one  man  has  a  fire  it  is  his 
own  misfortune.  He  must  bear  the  loss  if  he  can  or 
else  seek  assistance,  but  the  fires  of  many  constitute 
a  community  of  risk,  shared  by  so  many  individuals 
that  it  becomes  possible  to  apportion  indemnity 
among  those  who  desire  such  protection.  In  the 
case  of  fire  insurance  voluntary  payment  by  millions 
of  people  proves  that  the  public  desires  protection. 
When  a  man  pays  money  that  he  need  not  pay,  he 
believes  presumably  that  he  is  receiving  an  equiva- 
lent. How  account  for  the  long-continued,  wide- 
spread and  constantly-growing  voluntary  resort  to 
fire  insurance  unless  its  essential  principle  be  sound? 
There  are,  nevertheless,  certain  radical  spirits  who 
would  change  the  voluntary  into  the  compulsory  by 
making  fire  insurance  a  state  institution.  There  is 
an  occasional  outcropping  of  this  idea  in  legislative 
bills  but  fortunately  none  as  yet  has  been  enacted  into 
law.  If  there  were  a  fundamental  principle  would 
be  violated.  Fire  insurance  must  be  a  private  charge, 
not  a  public  one ;  because  the  principle  of  private  con- 
tract is  inherent  in  its  operation.  If,  for  example, 
a  man  should  refuse  to  pay  his  road-tax,  giving  as 
reason  that  he  did  not  wish  to  have  the  road  kept  in 
repair  before  his  house,  he  would  be  overruled  since 

[198] 


FIRE  INSURANCE  AND  THE  POLICY-HOLDER 

a  granting  of  his  wish  would  inflict  hardship  upon 
the  traveling  public.  The  same  thing  is  true  in  many 
other  matters  of  taxation;  the  failure  of  an  individual 
to  conform  interferes  with  the  rights  of  the  public, 
compulsion  is  therefore  necessary  and  justifiable. 
On  the  other  hand  the  failure  of  an  individual  to 
carry  fire  insurance  violates  no  public  right  since  it 
concerns  a  property  relation  and  must  be  dealt  with 
as  are  other  property  relations.  It  is  a  public  mat- 
ter only  in  the  sense  that  it  concerns  so  many  in- 
dividuals in  the  community,  but  it  concerns  these 
as  individuals;  with  certain  exceptions  each  policy- 
holder is  interested  in  no  policies  but  his  own.  It 
follows,  then,  that  coercion,  however  well  meant, 
is  public  interference  with  private  rights;  not  public 
protection  of  public  rights. 

Closely  associated  with  this  distinction  is  the  mat- 
ter of  private  collection;  in  other  words,  the  fact  that 
protection  is  afforded  and  premiums  are  collected  by 
business  organizations  and  not  by  the  state.  While 
this  is  a  logical  consequence  of  the  right  of  private 
contract,  most  policy-holders  are  what  the  late  Wil- 
liam James  would  have  classed  as  "pragmatists"; 
they  are  little  interested  in  theoretical  logic  but  are 
very  much  concerned  in  finding  out  "what  things 
will  work."  They  require  assurance  as  to  three 
things:  Sound  Protection,  Fair  Rates,  and  Equit- 
able Business  Methods.  If  public  insurance  could 
furnish  these  requisites  to  greater  advantage  than 
company   insurance,    there  would   be   no   hesitation 

[199] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

about  making  the  change.  Leaving  aside  ail  discus- 
sion of  dangerous  innovations,  socialistic  tendencies, 
and  the  like,  the  first  point  to  be  noted  is  that  state 
insurance,  the  only  form  that  could  be  made  com- 
pulsory, is  at  a  distinct  disadvantage  in  the  first  of 
these  requisites — it  cannot  guarantee  sound  protec- 
tion in  an  emergency.  This  is  due  to  a  fundamental 
reason :  //  lacks  breadth  of  average.  The  statement 
of  the  Governor  of  Wisconsin  (see  page  128)  fur- 
nishes a  striking  commentary  on  this  point.  Na- 
tional fire  insurance  is  out  of  the  question;  the  only 
form  that  has  come  in  for  any  discussion  is  that 
which  would  be  established  by  the  separate  states, 
and  no  single  state  can  compete  with  companies  that 
do  a  nation-wide  business  in  the  matter  of  averages. 
To  make  this  clear,  let  us  suppose  that  California 
had  been  insuring  the  property  of  its  citizens  at  the 
time  of  the  San  Francisco  conflagration.  Imagine 
the  effect  of  suddenly  adding  $220,000,000,  the  losses 
borne  by  insurance  companies,  to  the  burden  of  one 
state's  premiums.  This  would  have  bankrupted  the 
state,  most  of  the  insurance  would  have  remained  un- 
paid, and  the  rebuilding  of  San  Francisco  would 
have  been  set  back  by  many  years.  It  would,  paren- 
thetically, have  put  an  end  to  all  talk  of  state 
insurance. 

It  is  easy  to  see  how  the  companies  were  in  a 
stronger  position  to  meet  the  San  Francisco  calamity 
than  the  state  would  have  been ;  they  could  distribute 

[200] 


FIRE  INSURANCE  AND  THE  POLICY-HOLDER 

the  loss  over  the  entire  world.  Such  a  conflagration, 
in  fact,  is  like  a  cloud-burst,  which  would  turn  a 
stream  into  a  flood  but  make  little  difference  in  the 
level  of  a  lake.  This  must  not  be  considered  an  ex- 
treme deduction  from  an  isolated  case  for,  in  the 
words  of  the  United  States  Geological  Survey  report, 
and  to  the  knowledge  of  all  underwriters,  "the  dan- 
ger of  conflagration  is  present  in  every  city  and  vil- 
lage in  the  United  States."  This  fact  indicates  that 
sound  protection — emergency  protection — requires 
broad  averages  such  as  cannot  be  found  within  the 
limits  of  a  single  state.  These  averages,  therefore, 
cannot  be  commanded  by  state  insurance;  they  can 
be  and  are  commanded  by  companies  doing  a  widely 
distributed  business.  It  may  be  questioned  whether 
a  state  would  have  the  constitutional  right  to  tax  its 
own  citizens  for  the  benefit  of  the  citizens  of  other 
states,  as  would  have  to  be  done  if  the  law  of  aver- 
ages were  to  operate  as  observable  in  fire  insurance 
by  corporations. 

The  question  of  Fair  Rates  is  the  next  for  consid- 
eration. In  the  public  mind  and  to  the  political 
demagogue,  ''fair  rates"  mean  but  one  thing — lower 
rates.  The  underwriter,  however,  would  not  define 
them  so  easily  and  simply.  The  magnitude  of  the 
subject  is  something  that  the  public  and  the  politi- 
cian fail  to  realize. 

Any  individual  building  may  stand  for  a  century 
or  may  be  destroyed  within  a  fortnight,  but  when  a 

[201] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

sufficiently  large  number  are  considered,  there  can 
be  little  doubt  that  fires  will  occur  in  some  of  them 
each  year.  No  actuary  may  know  how  many  or 
which;  his  whole  concern  is  that  of  fixing  such  a  rate 
that  all  risks  may  bear  their  just  proportion  of  the 
total  loss,  may  pay  the  legitimate  expenses  of  the 
business,  and  may  yield  a  small  return  upon  the 
capital  required.  In  doing  this  he  must  take  into 
account  all  possible  variations  in  construction,  occu- 
pancy, exposure  and  protection.  It  will  be  realized 
that  his  task  is  not  a  simple  one. 

It  is  for  this  reason  that  underwriters  will  freely 
admit  that  rates  may  be  too  high  in  some  classes  of 
risks  and  too  low  in  others.  They  are  as  anxious 
as  is  the  policy-holder  that  such  errors  should  be  cor- 
rected, and  the  Actuarial  Bureau  of  the  National 
Board  is  going  to  great  expense  to  work  out  broad 
tables  of  averages  that  shall  help  them  to  do  this. 
Most  of  the  state  legislative  investigations  have  ad- 
mitted that  average  rates  are  not  excessive,  and  that 
underwriting  capital  receives  small  returns.  For  ex- 
ample, the  191 1  report  of  the  Illinois  Fire  Insurance 
Commission  has  this  to  say: 

As  we  have  shown,  the  publication  of  these  basis- 
schedules  have  produced  rates  that  have  left  an  aggre- 
gate net  profit  on  all  premiums  not  over  2  y2  per  cent,  for 
any  ten-year  period.  It  will  not  be  contended  that  this 
profit  on  the  sale  for  Indemnity  Is  exorbitant;  In  fact, 
it  Is  so  close  to  the  dead-line  of  cost  that  rates  as  a  whole 

[202] 


FIRE  INSURANCE  AND  THE  POLICY-HOLDER 

will  bear  no  reduction  unless  a  corresponding  economic 
reduction  can  be  effected  in  the  two  elements  of  outgo, 
that  is,  losses  and  expenses. 

Those  who  have  studied  the  subject  well  generally 
admit  that,  in  spite  of  the  infinite  complication  of  the 
matter,  fire  insurance  rates  on  the  whole  are  not  far 
from  what  they  should  be.  Still,  this  fact  does  not 
satisfy  the  individual  policy-holder.  It  is  quite  pos- 
sible that  he  may  be  paying  too  much  because  some 
one  else  is  paying  too  little,  or,  which  is  quite  as  bad 
from  an  economic  standpoint,  his  undercharge  may 
be  laying  an  unfair  burden  upon  some  other  policy- 
holder. Rates  should  be  fair  as  between  risks  in 
their  respective  classes  as  well  as  in  average.  This 
again  is  a  problem  of  incredible  difficulties,  and  its 
complete  solution  may  never  be  attained.  In  the 
mean  time,  various  schedules  are  being  used  with  a 
fair  degree  of  success,  and  of  these  the  most  con- 
spicuous are  the  Universal  Mercantile  Schedule, 
largely  the  work  of  Mr.  F.  C.  Moore,  and  the  Ana- 
lytical Schedule,  originated  by  Mr.  A.  F.  Dean. 

The  Moore  and  Dean  schedules,  as  they  are  com- 
monly known  among  the  underwriters,  have  their 
respective  partisans  and  have  been  derived  by  ap- 
proaching the  subject  from  somewhat  different  angles. 
The  first  assumes  a  flat  "base  rate"  for  a  building  of 
any  given  type  and  reaches  its  final  figure  by  addition 
and  subtraction,  certain  amounts  being  added  for 
various  elements  of  hazard  and  certain  reductions  be- 

[203] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ing  made  for  conditions  that  would  lessen  the  same. 
In  the  Dean  schedule  a  base  rate  is  likewise  assumed, 
but  the  charges  and  allowances  are  calculated  as  per- 
centages of  this  base  rate  instead  of  being  added  or 
subtracted  as  flat  amounts,  thus  recognizing  a  re- 
lationship between  the  hazards.  The  Experience 
Grading  and  Rating  Schedule,  originated  by  Mr. 
E.  G.  Richards,  has  just  been  published  (191 5)  and 
has  not  yet  received  the  test  of  service.  In  brief,  it 
proposes  to  make  a  scientific  application  of  the  ex- 
tensive information  being  collected  and  formulated 
by  the  Actuarial  Bureau,  through  a  minute  study  of 
loss-experience.  Still  another  schedule  which  has 
not  yet  been  put  into  actual  service  is  the  L.  &  L. — 
an  adaptation  from  the  Moore  and  Dean  schedules. 
The  preparation  of  each  of  these  schedules  has  rep- 
resented long  and  arduous  work  whose  highly  tech- 
nical nature  may  not  even  be  indicated  in  such  brief 
summaries,  but  all  of  them  have  been  earnest  efforts 
to  approach  a  solution  of  the  world's  most  intricate 
financial  problem.  The  offhand  opinions  of  politi- 
cians are  hardly  comparable  with  all  this  exact 
knowledge.  So  much  for  the  discussion  of  the  sec- 
ond requisite — fair  rates. 

The  third  factor,  that  of  Equitable  Business 
Methods,  means,  essentially,  straightforward  policy 
contracts,  freedom  from  unfair  discriminations,  and 
prompt  adjustment  and  payment  of  losses.  The  con- 
ditions of  the  policy-contract  to-day  are  regulated 
by  law  in  most  of  the  different  states  and  the  New 

[204] 


FIRE  INSURANCE  AND  THE  POLICY-HOLDER 

York  state  standard  form  has  been  usually  adopted 
for  states  that  do  not  prescribe  their  own  standards. 
Discrimination  against  individuals  is  virtually  non- 
existant,  and  discrimination  between  localities  rarely 
expresses  more  than  the  difference  in  local  condi- 
tions. On  the  other  hand,  most  underwriters  will 
admit  that  there  is  room  for  a  much  closer  conform- 
ity in  rate  between  certain  classes  of  risks.  This,  it 
is  believed,  will  tend  to  disappear  as  the  work  of 
the  National  Board's  Actuarial  Bureau  progresses. 
Promptness  in  adjustment  of  losses  has  long  been  the 
tradition  of  the  business. 

The  relations  between  fire  insurance  and  the  policy- 
holder are  thus  more  complex  than  the  latter  has  be- 
gun to  grasp.  He  is  the  unit  of  all  calculation  and, 
with  millions  of  other  units  in  every  center  and  corner 
of  the  country,  he  makes  underwriting  a  nation-wide 
business.  Whether  he  lives  in  the  country  or  the  city, 
he  has  a  vital  interest  in  the  welfare  of  the  business. 
In  the  last  analysis  it  is  he  and  his  fellows  who  pay 
the  losses  of  himself  and  his  fellows,  the  company 
being  merely  the  medium  of  adjustment;  therefore, 
the  expense  of  undue  limitation  falls  inevitably  upon 
him. 


[205] 


XVIII 
FIRE  INSURANCE  IN  ITS  RELATION  TO  BUSINESS 

PRIMITIVE  business  was  carried  on  by  direct 
barter  in  which  one  man  exchanged  his  spare 
goods  for  those  of  his  neighbor;  the  business 
of  our  more  immediate  forefathers  was  transacted 
with  a  circulating  medium;  but  important  business 
to-day  is  conducted  almost  entirely  by  means  of 
credit.  This  is  too  well  recognized  to  need  com- 
ment, but  it  serves  to  introduce  this  striking  statement 
from  the  report  of  the  Insurance  Investigating  Com- 
mittee of  the  New  York  state  legislature : 

A  paralysis  of  credit  produces  disastrous  results,  in 
panics  and  financial  depressions.  The  credit  system,  how- 
ever, is  founded  on  the  institution  of  insurance;  without 
insurance  it  would  be  impossible  to  get  a  loan  on  a  cargo 
of  wheat  or  to  mortgage  a  house  or  for  a  retailer  to  buy 
on  time-payment  a  bill  of  goods  from  a  wholesale 
merchant.  Insurance  is  the  foundation  of  the  modern 
credit  system,  and  by  just  so  much  as  the  welfare  of  so- 
ciety is  founded  on  the  free  operation  of  credit  by  so 
much  is  the  Institution  of  insurance  of  Importance  to  the 
public,  quite  aside  from  its  value  In  actually  distributing 
loss. 

Such  a  wholesale  merchant  as  above  referred  to  has 
given  more  extended  testimony  on  his  own  behalf. 

[206] 


FIRE  INSURANCE  IN  RELATION  TO  BUSINESS 

Perhaps  no  man  could  speak  with  greater  authority 
than  Harlow  N.  Higginbotham,  of  the  firm  of  Mar- 
shall Field  &  Company,  who  was  honored  with  the 
presidency  of  the  Chicago  World's  Fair.  He  has 
said  upon  this  topic : 

As  a  matter  of  fact,  It  would  be  impossible  to  carry  on 
business  without  insurance  against  loss  by  fire.  It  would 
so  disturb  values  of  all  property  that  it  would  materially 
interfere  with  the  loaning  of  money;  credits  which  are 
such  a  vast  aid  now  would  be  almost  impossible.  It 
would  practically  reduce  trade  to  a  cash  basis  and  limit 
the  volume  of  business  almost  to  stagnation.   .   .   . 

In  extending  credits  to  merchants,  I  am  constantly  con- 
sidering questions  concerning  a  customer's  fire  insurance. 
His  statement  of  his  assets  would  not  be  complete  if  It  did 
not  set  forth  the  amount  of  insurance  carried,  as  well  as 
the  kind  of  building  occupied  and  its  environment.  It  Is 
to  me  a  note  of  warning  If  I  find  a  customer  either  over- 
or  underinsured.  If  he  Is  overlnsured,  I  am  thinking  of 
the  moral  hazard  to  me  In  extending  credit  to  him.  If 
he  is  underinsured  I  am  thinking  of  the  business  hazard 
in  extending  credit  to  him.  I  always  take  the  liberty  of 
cautioning  customers  who  even  temporarily  carry  over- 
Insurance.  .   .   . 

I  frequently  find  a  customer  or  would-be  customer  with- 
out insurance  arguing  that  he  has  a  right  to  insure  him- 
self, sometimes  because  the  building  is  isolated  or  spe- 
cially well  constructed,  and  sometimes  for  the  reason  that 
the  buildings  are  poor  and  the  rate  Is  too  high,  and  he 

[207] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

cannot  afford  to  pay  it.  I  have  always  advised  against 
such  a  plan,  and  not  infrequently  have  been  compelled 
to  decline  or  restrict  the  amount  of  credit  because  the 
customer  persisted  in  carrying  his  own  insurance.  .  .  . 
The  only  safe  way  is  to  insure,  and  a  business  that  will 
not  enable  a  man  to  insure  is  not  worth  having  and  should 
be  promptly  discontinued. 

The  vast  business  of  fire  insurance,  with  its  $60,- 
000,000,000  of  protective  contracts  in  the  United 
States,  thus  forms  the  real  basis  of  modern  commer- 
cial relations.  Its  very  existence  makes  it  possible  to 
maintain  the  confidence  so  necessary  to  business  life. 
This  is  one  of  its  static  or  potential  values.  Another 
is  found  in  its  direct  stimulus  to  enterprise.  Careful 
business  men  otherwise  would  be  compelled  to  main- 
tain large  reserves  in  cash  or  in  convertible  securities 
to  guard  against  fire,  but  fire  insurance  enables  them 
to  use  their  resources  freely  and  profitably  in  their 
operations;  and  this  fact  has  been  no  small  item  in 
the  wonderful  growth  of  American  business — capital 
becomes  bold  and  energetic  when  freed  from  the  fear 
of  disaster.  Fire  insurance  does  away  with  the 
necessity  for  keeping  capital  idle.  It  is  the  balance- 
wheel  upon  the  engine  that  drives  American  indus- 
trial and  commercial  life. 

There  is  also  an  active  working  use  of  fire  insurance 
in  something  like  half  a  million  cases  every  year  with 
direct  business  effect  in  each  case.  Such  are  the  pay- 
ment of   individual    losses.     The   instances   are   in- 

[208] 


FIRE  INSURANCE  IN  RELATION  TO  BUSINESS 

numerable  where  solvency  has  been  maintained  only 
through  the  payments  received  from  insurance  com- 
panies, and  business  enabled  to  continue  as  an  em- 
ployer and  creator  of  values.  Many  of  these  instan- 
ces have  their  human  side.  The  decline  of  a  man 
from  an  efficient  producer  into  the  ''down-and-out" 
class  through  discouragement  represents  a  financial 
loss  to  society  quite  as  real  as  that  which  economists 
strive  to  estimate  in  the  case  of  maiming  or  untimely 
death.  It  is  not  an  exaggeration  to  say  that  fire  In- 
surance has  a  large  business  value  in  this  phase  of  the 
conservation  of  efficiency. 

Another  important  value  is  found  in  the  minimiz- 
ing of  business  interruption.  Many  lines  of  efforts 
suffer  severely  when  forced  to  stop  for  any  length  of 
time;  hands  drift  away;  customers  form  new  rela- 
tions; seasonal  advantages  are  lost;  competition  is 
given  a  stronger  foothold.  Thus,  without  actual 
physical  loss,  prolonged  suspension  sometimes  effects 
the  ruin  of  an  important  concern.  Fire  insurance 
helps  to  prevent  such  suspension;  it  makes  possible 
immediate  plans  for  resumption  and  reconstruction 
after  a  fire,  and  gives  a  continuity  to  business  that  in 
itself  is  worth  many  millions  of  dollars  each  year. 
And  in  recognition  of  this  fact,  it  is  the  general 
policy  of  all  leading  companies  to  make  prompt  ad- 
justments, where  there  are  no  suspicious  circum- 
stances. 

But  perhaps  the  most  spectacular  relation  of  fire 
insurance  to  business  has  to  do  with  conflagration 

[209] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

hazard.  It  has  already  been  noted  that  modern  life 
tends  toward  living  in  cities,  where  enormously  large 
values  are  compressed  within  a  few  square  miles. 
From  time  to  time  some  community  will  be  swept  by 
terrific  scourges  of  flame  that  wipe  huge  sums  ofif  the 
national  financial  ledger.  These  losses  are  absolute 
and  irretrievable — there  is  no  salvage  in  the  Ameri- 
can ash-heap — but  their  paralyzing  efifect  is  reduced 
to  its  lowest  terms  by  the  operation  of  fire  insurance 
which  distributes  the  burden  of  loss  throughout  the 
country.  Some  cities  probably  would  have  ceased 
for  a  time  to  exist  as  commercial  factors  without  such 
assistance.  It  is  difficult,  for  example,  to  conceive 
of  San  Francisco's  being  compelled  to  bear  the  sole 
burden  of  its  $350,000,000  loss  without  an  effect  upon 
taxes  and  values  that  would  have  set  it  back  for  at 
least  a  generation.  The  resulting  disarrangement  of 
our  delicately  adjusted  commercial,  industrial,  and 
financial  system  might  easily  have  resulted  in  such  a 
nation-wide  financial  panic  as  would  have  swept 
away  other  hundreds  of  millions  in  values. 

Since  "the  danger  of  conflagration  is  present  in 
every  city  and  village  in  the  United  States,"  as  the 
United  States  Geological  Survey  Report  has  said, 
this  is  a  fact  that  must  never  be  overlooked.  It  is, 
therefore,  not  astonishing  that  the  New  York  State 
Investigating  Committee  should  characterize  the  con- 
flagration hazard  as  "an  unspeakable  menace"  while 
referring  to  Fire  Insurance  as  "an  agency  for  distrib- 
uting the  loss  over  the  whole  community,  so  that  it 

[210] 


FIRE  INSURANCE  IN  RELATION  TO  BUSINESS 

shall  not  deal  a  crushing  blow  to  those  who  have 
suffered" ;  or  that  the  Illinois  Commission  should  say 
that  "the  public  mind  does  not  seem  able  to  grasp 
the  idea  that  stock  insurance  is  its  only  protection 
against  conflagrations";  and  again,  "In  our  judgment 
the  safety  of  the  American  public  depends  upon  the 
ability  of  stock  insurance  to  make  good,  in  the  event 
of  an  impending  city  conflagration  which  may  occur 
at  any  time." 

Whether  viewed  as  a  basis  of  credit,  a  stimulus  to 
enterprise,  a  preservative  of  solvency,  a  moral  safe- 
guard, a  protector  of  continuity  or  a  refuge  from  the 
"unspeakable  menace"  of  conflagrations;  fire  insur- 
ance is  easily  entitled  to  rank  as  one  of  the  most 
fundamental  factors  in  modern  business  life. 


[211] 


XIX 

FIRE  INSURANCE  IN  ITS  RELATION  TO 
THE  STATE 

PRIMARILY,  the  function  of  the  state  in  a 
democratic  country  is  to  minister  to  the  wel- 
fare of  its  citizens.  This  implies,  first,  pro- 
tection from  danger  of  every  kind  and,  second,  en- 
couragement for  all  forms  of  progress.  The  rela- 
tions between  fire  insurance  and  the  state  involve 
both  of  these  functions  in  peculiarly  complex  form. 

In  the  earliest  days,  fire  insurance  companies 
received  their  charters  from  the  states  in  which  they 
were  formed  and,  beyond  the  direct  provisions  of 
their  charters,  their  conduct  was  governed  by  the 
general  operation  of  business  law.  But  with  the 
rapid  extension  of  underwriting,  the  attention  of 
legislators  was  attracted  soon  to  the  opportunity,  if 
not  the  need,  for  special  legislation.  Thus,  in  1807, 
Massachusetts  passed  a  law  requiring  insurance  com- 
panies to  render  an  account  of  their  affairs  to  the  next 
General  Court.  This  would  not  have  been  required 
of  a  dry-goods  merchant,  for  example,  or  of  a  ship- 
chandler;  it  was,  in  fact,  a  distinct  recognition  of  the 
quasi-public  nature  of  the  insurance  business. 

After  such  early  activity,  legislation  soon  showed  a 
tendency  to  concern  itself  more  deeply  with  the  op- 

[212] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 


erations  of  underwriting.  In  1820,  Massachusetts 
placed  a  limitation  upon  writing-capacity,  no  com- 
pany being  permitted  to  assume  a  single  risk  exceed- 
ing 10  per  cent,  of  its  paid-in  capital;  in  1832,  taxa- 
tion and  bond  features  were  added;  in  1837,  answers 
were  required  to  a  list  of  twenty-one  questions,  giv- 
ing minute  details  of  investments  and  on  other  points ; 
in  the  early  '40's,  restriction  was  made  as  to  the 
amount  of  railroad  stock  which  might  be  owned. 
These  are  but  a  few  of  the  steps  by  which  this  one 
state  assumed  an  increasingly  supervisory  attitude  to- 
ward fire  insurance;  other  states,  meanwhile,  were 
legislating  along  somewhat  similar  lines. 

In  the  '50's  there  came  the  next  logical  develop- 
ment; several  of  the  states  organized  definite  Insur- 
ance Departments,  administered  by  commissioners, 
and  others  gave  special  supervisory  powers  to  some 
one  or  more  of  their  executive  officers.  To-day 
nearly  all  of  the  states  have  insurance  commissioners 
or  superintendents,  some  of  whom  possess  autocratic 
powers.  Thus,  willy-nilly,  the  underwriters  have 
seen  their  operations  removed  from  the  status  of  a 
private  business  under  their  own  control  to  that  of 
semipublic  business  whose  control  is  dictated  largely 
from  outside  sources.  At  every  step  they  have  pro- 
tested, sometimes  with  a  degree  of  success,  but  the 
general  trend  has  been  toward  the  assumption  of 
greater  and  greater  supervisory  powers  on  the  part 
of  the  states.  This  fact  is  neither  to  be  approved 
nor  condemned  out  of  hand;  a  proper  estimate  of  it 

[213] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

requires  a  careful  scrutiny  of  the  conditions  involved. 

In  the  first  place,  the  business  of  fire  insurance, 
while  privately  owned,  has  long  passed  the  stage 
where  it  can  be  denied  that  the  public  has  a  large 
interest  in  its  conduct.  It  already  has  been  shown 
that  it  ramifies  into  every  community  of  the  country, 
concerns  the  individual  safety  of  almost  every  in- 
habitant and  underlies  the  whole  structure  of  Ameri- 
can business  and  finance.  The  interests  of  several 
thousand  stockholders  cannot  be  compared  with  those 
of  one  hundred  million  citizens;  any  clear  conflict 
between  them  would  have  to  be  decided  in  favor  of 
the  latter.  Therefore  the  principle  of  some  degree 
of  public  supervision,  which  tends  to  safeguard  the 
integrity  of  this  institution  in  the  interests  of  these 
citizens,  is  scarcely  open  to  argument. 

But  when  we  consider  the  practise  by  which  this 
principle  becomes  operative,  the  situation  changes  at 
once.  So  great  is  the  divergence  of  views  among 
those  who  represent  the  state,  and  so  diametrically 
opposed  are  the  methods  of  some  of  them  that  argu- 
ment is  inevitable.  All  claim  to  have  the  public 
welfare  at  heart;  it  is  evident,  therefore,  that  other 
tests  must  be  applied  than  that  of  individual  sin- 
cerity. 

Let  us  turn  back  to  our  original  proposition  that 
the  state  should  protect  its  citizens  from  danger  and 
should  encourage  their  progress,  and  endeavor  to  see 
in  what  manner  either  of  these  duties  is  here  involved. 
Protection  from  danger,  of  course,  cannot  be  limited 

[214] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 

to  the  physical  protection  furnished  by  military  or 
police  forces.  It  properly  may  be  concerned  with 
the  safeguarding  of  any  form  of  right.  If  it  should 
appear  that  the  conduct  of  the  insurance  business 
tended  toward  imperiled  safety,  wilful  discrimina- 
tion, extortionate  rates,  or  other  form  of  public  abuse, 
it  would  be  the  manifest  duty  of  the  state  to  apply  cor- 
rective measures.  If,  on  the  other  hand,  these  dan- 
gers did  not  exist,  such  legislation  would  be  super- 
fluous; and  would  be  open  to  the  criterion  involved 
in  the  wise  old  ruling:  "Unless  you  have  a  good  rea- 
son for  doing  a  certain  thing,  you  have  a  very  good 
reason  for  not  doing  it."  Overgovernment  is  as  un- 
sound as  undergovernment. 

Is  there,  then,  a  public  menace  in  underwriting 
methods? 

If  the  reader  has  followed  the  story  told  in  the 
earlier  chapters  he  will  realize  that  the  business  of 
American  underwriting  has  undergone  a  series  of  pro- 
found internal  changes.  In  its  chaotic  early  days  it 
often  weakened  its  resources  and  imperiled  the  pro- 
tective power  of  its  policies  through  rate-cutting,  and 
at  other  times  it  swung  to  the  opposite  extreme  of  ex- 
tortionate overcharge.  It  tolerated  a  considerable 
number  of  irresponsible  ''wildcat"  concerns,  and  even 
honest  companies  were  likely  to  go  to  the  wall  under 
special  strain  as  at  the  time  of  the  Chicago  fire.  This, 
of  course,  meant  danger  for  the  public.  To-day  these 
unsound  conditions  have  almost  entirely  disappeared ; 
state  investigating  committees  have  testified  as  to  the 

[215] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

moderate  quality  of  rates;  "wildcatting,"  in  the  old 
sense,  is  no  more.  Nobody  questions  the  responsibil- 
ity of  stock  insurance-policy  contracts;  the  com- 
panies endured  the  terrific  strain  of  San  Francisco's 
conflagration  with  few  failures.  Settlement  of  losses 
is  notably  prompt  and  just.  The  public,  in  short,  is 
amply  protected. 

This  change  has  been  effected  in  but  small  degree 
by  state  regulation;  it  has  been  chiefly  due  to  a  nat- 
ural process  of  evolution.  Fire  underwriting  has 
been  the  first  among  America's  great  business  inter- 
ests to  learn  by  itself  the  lesson  that  its  own  and  the 
public  welfare  are  identical.  The  story  of  the 
National  Board  shows  that  this  lesson  was  learned 
slowly  and  painfully  through  many  years.  Long 
periods  of  conflict  were  experienced  and  the  failure 
of  hundreds  of  companies  was  an  unfortunate  factor 
in  the  acquisition  of  knowledge.  But  the  lesson  ivas 
learned  in  time  and  to  a  degree  of  final  and  profound 
conviction.  Public  enjoyment  of  fair  rates,  sound 
protection,  prompt  adjustments,  and  freedom  from 
discrimination  is  not  due,  therefore,  to  unwilling 
virtue  under  compulsion,  but  to  the  underwriters' 
knowledge  that  any  other  course  would  be  unprofit- 
able— bad  business.  It  is  doubtless  well  that  all 
lines  of  proper  conduct  should  be  formulated  into 
laws,  and  no  underwriter  could  object  to  this;  but 
results,  in  this  instance,  rest  upon  fundamental  social 
laws  that  lie  deeper  than  statutes.  It  is  scarcely  con- 
ceivable that  modern  underwriting  practises  would 

[216] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 

be  materially  different  in  these  respects  had  there 
been  no  legislation  upon  the  subject. 

From  a  consciousness  of  this  fact  one  turns  with  a 
feeling  of  surprise,  of  bewilderment,  to  the  intense 
activity  of  forty-eight  state  legislatures  fairly  seething 
with  legislation  upon  fire  insurance.  Why  should 
there  be  a  necessity  for  twenty-five  hundred  bills  in 
a  single  year  unless  the  subject  be  one  of  immediate 
and  overwhelming  emergency?  So  remarkable  a 
phenomenon  challenges  explanation.  We  have  al- 
ready defined  the  duties  of  government  as  two-fold — 
protection  from  danger,  and  encouragement  of  prog- 
ress. If  the  foregoing  analysis  be  sound,  the  public, 
in  insurance  matters,  is  already  amply  protected  by 
fundamental  business  principles  as  well  as  by  existing 
statutes;  there  would  then  remain  as  an  explanation 
for  such  feverish  activity  but  the  laudable  purpose 
of  encouraging  progress.  On  this  point  there  are 
several  interesting  considerations  to  be  noted. 

For  example,  no  student  of  fire  insurance  can  fail 
to  recognize  its  essential  mutuality,  whatever  the  out- 
ward form.  Money  received  from  the  public  is  used 
in  paying  the  losses  of  the  public;  the  companies 
are  the  machinery  by  means  of  which  such  distribu- 
tion is  made  equitable  and  efficient.  It  follows, 
therefore,  that  the  public  must  pay  the  expense  if 
legislation  increase  expense;  must  pay  for  loss  of 
efficiency,  if  legislation  impair  efficiency,  and  must 
profit  by  bettered  conditions,  if  legislation  better  con- 
ditions.    Save  in  a  technical  sense,  the  public  itself 

[217] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

is  the  body  of  each  company.  With  this  point  well 
in  mind,  the  next  to  be  noted  is  that  this  public  is  a 
national  one.  It  is  not  divided  by  state  lines.  The 
losses  of  Connecticut  and  Texas  are  paid  in  part  by 
Iowa  and  Georgia,  and  vice  versa.  As  the  business 
is  conducted  on  national  lines,  because  of  its  national 
averages,  there  is  no  essential  difference  in  fire-insur- 
ance interests  between  Portland,  Maine,  and  Port- 
land, Oregon,  between  New  Orleans  and  Duluth. 
American  underwriting  is  an  affair  of  the  American 
people  in  an  undivided  sense;  the  fire  insurance  leg- 
islation of  any  one  state  can  only  serve  the  people 
of  that  state  by  serving  all  the  people  of  all  the  states. 
If  this  be  true,  it  cannot  be  gainsaid  that  efficiency 
can  be  promoted  only  by  a  harmoniously  constructive 
policy  arranged  between  the  states  upon  this  uni- 
versal and  tremendously  important  subject.  One 
need  not  be  an  efficiency  engineer  to  realize  this,  and 
it  gives  a  shock  to  observe  that  the  forty-eight  states 
are  in  a  turmoil  of  conflicting  ideas.  In  one  state, 
for  example,  there  is  a  law  upon  the  statute-books 
which  virtually  makes  it  a  crime  for  two  insurance 
agents  to  meet  upon  the  street  and  talk  about  their 
business;  companies  are  absolutely  forbidden  to  com- 
bine in  the  matter  of  rates,  forms,  practises,  commis- 
sions, or  anything  else.  In  an  adjoining  state,  with 
several  hundred  miles  of  contiguous  territory,  the 
same  companies  are  heavily  penalized  if  they  do  not 
combine  in  the  matter  of  rates.  In  other  words, 
combination  is  a  punishable  offense  in  one  state  while 

[218] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 

in  its  neighbor,  separated  only  by  a  geographical 
boundary-line  and  where  insurance  interests  are 
identical,  lack  of  combination  is  the  punishable  of- 
fense. Some  states  are  devoted  to  ^'Valued  Policy" 
legislation,  others  declare  it  to  be  "heresy."  There 
is  no  essential  difference  in  the  basis  of  insurance  in 
these  states ;  such  principles  must  be  sound  doctrine  or 
heresy  in  all  alike.  Wisconsin,  which  introduced  the 
''Valued  Policy"  measure  and  followed  it  for  many 
years,  now  repudiates  it  as  ''absolutely  vicious." 
There  has  been  no  change  in  conditions  in  this  re- 
spect; consequently  if  vicious  now  it  must  have  been 
vicious  twenty  years  ago.  Some  states  advocate  state 
rate-making  and  their  sister  states  reject  it.  Theories 
and  practises  in  the  matter  of  taxation  are  widely 
divergent — and  so  on  through  a  multiplicity  of  dis- 
agreements. 

All  of  this  may  be  reduced  to  a  syllogism :  regula- 
tion by  the  states  has  resulted  in  discord;  discord  pro- 
duces inefficiency.  Regulation  by  the  states,  there- 
fore, has  resulted  in  inefficiency.  From  this  another 
syllogism  proceeds:  inefficiency  increases  the  cost  of 
underwriting;  the  cost  of  underwriting  is  borne  by 
the  public;  inefficiency,  therefore,  increases  the  cost 
to  the  public.  These  two  conclusions  compel  the  ac- 
ceptance of  another;  regulation  by  the  states,  in  this 
respect  at  least,  has  increased  the  cost  to  the  public. 
Probably  no  one  who  has  given  the  matter  careful 
study  will  question  the  soundness  of  this  conclusion. 

Searching,   as  one   needs  must  do,   for  sufficient 

[219] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

emergency  to  account  for  the  astounding  activity  in 
fire  insurance  legislation,  it  is  apparent  that  such 
necessity  has  not  yet  been  discovered.  The  net  re- 
sult of  the  inquiry  up  to  this  point  has  been  to  show: 

1.  That  the  state's  duty  to  protect  the  public  from 
danger  is  not  involved  in  this  instance,  since  no  such 
danger  exists. 

2.  That  the  state  has  not  only  failed  to  encourage 
progress  but,  in  one  important  respect,  has  promoted 
discord  and  inefficiency,  resulting  in  increased  cost 
to  the  public. 

It  will  be  noted  that  this  is  not  in  contravention  of 
the  principle  of  state  supervision;  it  refers  solely  to 
the  methods  of  practise.  Unsatisfactory  results  im- 
ply unsatisfactory  methods,  and  lawmakers,  who  are 
so  addicted  to  turning  the  search-light  upon  the  work 
of  others,  cannot  complain  if  they  themselves  are  sub- 
jected to  a  similar  examination  when  they  have  con- 
spicuously failed  in  a  matter  of  grave  public  concern. 
Making  all  due  allowance  for  exceptions,  here  and 
there,  there  are  four  outstanding  facts  which  in  gen- 
eral characterize  the  avalanche  of  fire  insurance  leg- 
islation constantly  being  proposed  throughout  the 
country. 

I.  It  displays  ignorance.  We  have  already  had  a 
glimpse  of  the  extreme  and  highly  technical  com- 
plexity of  fire  underwriting.  Practises  governing 
large  interests,  and  resulting  from  years  of  expe- 
rience and  the  study  of  highly  trained  experts  may  be 
overthrown  in  a  moment  by  the  passage  of  some  meas- 

[220] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 

ure  framed  by  a  layman  with  no  practical  knowledge 
of  the  subject.  In  a  single  state  such  a  measure  may 
have  a  vital  efifect  upon  $500,000,000  in  insurance, 
carried  by  a  quarter  of  a  million  citizens  at  an  annual 
cost  of  $5,000,000;  not  to  speak  of  the  welfare  of  sev- 
eral hundred  companies  and  the  livelihood  of  five 
thousand  resident  agents.  Were  it  possible  for  fire- 
insurance  bills  to  be  framed  only  by  those  who  had 
given  long,  intelligent,  and  fair-minded  study  to  the 
subject,  underwriting  would  be  freed  from  a  danger 
hardly  second  to  the  "unspeakable  menace"  of  con- 
flagrations. 

2.  It  is  unfriendly.  This  point  is  closely  asso- 
ciated with  the  other,  but  possesses  some  special  fea- 
tures of  its  own.  Many  of  the  bills  introduced  are 
conceived  in  a  spirit  of  indiscriminate  hostility  to 
large  institutions  as  such.  From  time  immemorial, 
politicians  of  a  certain  type  have  sought  to  pose  as 
defenders  of  the  people  from  the  aggressions  of 
capital.  Their  formula  is  elastic  and  may  be  widely 
applied.  David  attacking  Goliath,  St.  George  at- 
tacking the  dragon — these  are  figures  that  readily 
appeal  to  the  popular  imagination,  and  the  politician 
has  learned  that  popularity  and  applause  may  be  most 
quickly  attained  by  attacking  largeness,  in  whatever 
form  it  may  be  found.  "Big-game"  hunting  is  there- 
fore not  altogether  a  matter  of  recreation;  it  brings 
its  political  rewards.  Fire  insurance  companies  seem 
to  be  the  most  accessible  of  the  larger  fauna. 

Other  unfriendly  motives  are  to  be  found  in  re- 

[221] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

venge,  as  where  some  legislator  or  constituent  believes 
himself  to  have  a  grievance  against  some  company 
and  retaliates  upon  all  companies;  in  "strike  bills" — 
now  infrequent,  because  they  have  been  uniformly 
unsuccessful — where  a  threatening  measure  is  intro- 
duced simply  in  order  to  be  bought  off;  in  bills  im- 
posing excessive  taxation  as  a  measure  of  local  rev- 
enue; in  bills  to  compel  undue  privileges  to  policy- 
holders, such  as  found  in  the  "Valued  Policy"  laws 
and  others;  in  bills  to  require  special  deposits  for 
alleged  reasons  of  increased  protection;  in  bills  to 
discourage  the  operation  of  companies  in  order  to 
make  insurance  a  state  function,  and  in  more  regula- 
tive, restrictive,  and  constrictive  measures  than  even 
can  be  hinted  at  in  a  brief  narrative. 

3.  It  is  heterogeneous.  The  fact  that  different 
states  assume  control  over  the  fire  insurance  business 
without  uniformity  of  plan  or  purpose,  makes  it  im- 
possible for  the  companies  to  standardize  their 
methods  as  should  be  done  in  the  interests  of  the  pub- 
lic as  a  whole. 

4.  It  is  incessant.  Conditions  never  can  be  con- 
sidered as  established  or  settled  while  there  is  a  con- 
stant imminence  of  new  bills  that,  at  any  time,  may 
create  sweeping  changes. 

In  the  light  of  these  considerations  it  is  not  aston- 
ishing that  the  net  result  of  the  relations  between  fire 
insurance  and  the  state  has  been  conspicuous  fail- 
ure on  the  part  of  the  latter.  Instead  of  protecting 
the  people,  they  have  been  endangered;  instead  of  en- 

[222] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 

couraging  progress,  it  has  acted  as  a  drag.  This  is 
a  sweeping  statement,  and  it  admits  of  certain  im- 
portant exceptions;  but,  in  the  main,  it  is  incontest- 
able. 

So  much  for  the  reverse  side  of  a  subject  that  nat- 
urally has  an  obverse  one  as  well.  One  of  the  latter's 
features  relates  to  the  National  Convention  of  Insur- 
ance Commissioners. 

Most  of  the  states,  as  already  described,  have  in- 
surance commissioners  or  superintendents,  who  are 
administrative  officers  for  the  execution  of  insurance 
laws.  For  some  years  these  commissioners  have 
made  it  a  custom  to  gather  in  annual  conventions  for 
the  discussion  of  insurance  problems,  and  of  late  there 
has  been  at  these  meetings  an  increase  in  seriousness 
of  tone  together  with  a  greater  tendency  to  seek  real 
solutions  of  insurance  problems.  Thus  it  has  come 
about  that  a  valuable  opportunity  for  exchange  of 
ideas  between  those  representing  different  sections  of 
the  country  has  been  created,  and  also  that  those  hav- 
ing the  greater  experience  and  knowledge  of  their 
subject  inevitably  exercise  the  greater  influence  in 
joint  discussions. 

This  body  is  an  excellent  example  of  a  new  factor 
that  seems  to  be  at  work  in  our  system  of  government, 
that  of  the  harmonizing  influence  of  non-legislative 
conventions.  An  innovation  proposed  by  any  com- 
missioner is  naturally  viewed  in  the  light  of  the  ex- 
perience of  others,  and  if  it  should  appear  that  sev- 
eral states  have  already  found  the  idea  unworkable,  it 

[223] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

will  probably  seem  less  desirable  to  its  advocate.  It 
is  frequently  noticed  that  some  new  commissioner, 
with  the  zeal  of  inexperience,  announces  a  sweeping 
program  of  changes  soon  after  his  induction  into 
office,  but  becomes  more  conservative  after  he  has  had 
an  opportunity  to  compare  his  ideas  with  those  of  his 
more  experienced  peers  in  the  convention.  This 
body  also  constitutes  the  best  medium  for  spreading 
the  knowledge  of  real  improvements.  Thus,  al- 
though its  individual  members  may  change  from  year 
to  year,  such  a  body  tends  to  accumulate  tradition 
and  to  become  a  definite  influence.  While,  unfor- 
tunately, the  insurance  commissionership  is  some- 
times regarded  merely  as  a  stepping-stone  to  higher 
office,  the  convention  does  contain  many  unquestioned 
experts  who  are  earnestly  striving  to  work  out  a  con- 
structive policy.  Such  discussions,  therefore,  can- 
not fail  in  time  to  act  as  correctives  upon  each  of  the 
four  above-mentioned  menacing  elements  of  insur- 
ance legislation.  They  must  replace  ignorance  with 
knowledge,  unreasoning  hostility  with  fairness,  diver- 
sity with  uniformity,  and  change  with  continuity. 
The  perfect  consummation  of  this  is,  indeed,  still  far 
in  the  future — the  present  moment  is,  perhaps,  that 
of  the  crest  of  the  legislative  turmoil,  but  there  are 
not  a  few  indications  that  leading  thinkers  among  the 
commissioners  are  coming  to  recognize  and  advocate 
certain  truths  that  the  companies  have  learned  from 
hard  experience.  Thus,  there  is  in  process  of  for- 
mation the  basis  of  a  genuinely  constructive  policy 

[224] 


FIRE  INSURANCE  IN  RELATION  TO  STATE 

which,  in  time,  may  work  through  the  legislative 
bodies  and  formulate  itself  in  a  series  of  broad,  fair, 
and  uniform  laws  throughout  the  United  States. 
When  this  millennial  point  is  approached,  the  Na- 
tional Board  and  the  State  will  be  found  as  har- 
monious, cooperating  factors  in  solving  an  important 
problem  in  American  civilization. 

One  of  the  ablest  members  of  the  National  Con- 
vention of  Insurance  Commissioners  recently  struck 
the  key-note  of  the  new  conception.  "Corporations," 
said  he,  "must  be  encouraged  and  allowed  to  prosper 
reasonably,  but  kept  under  proper  public  super- 
vision." 


[225] 


XX 

THE  NATIONAL  BOARD  AS  A  CIVILIZING  FORCE 

IN  spite  of  such  retrogression  as  the  present 
great  European  War,  one  must  believe  that  hu- 
man affairs,  on  the  whole,  are  progressing 
toward  a  larger  measure  of  knowledge,  justice,  se- 
curity and  comfort.  In  the  United  States  this  trend 
seems  particularly  marked.  Side  by  side  with 
growth  in  population  and  wealth  there  have  been  un- 
mistakable signs  of  organizing  and  civilizing  in- 
fluences permeating  the  body  of  the  nation  and  giving 
it  structure  as  well  as  bulk.  The  most  interesting 
single  fact  about  the  fifty  years'  story  under  consid- 
eration is  the  conviction  that  it  has  shown  the  Na- 
tional Board  of  Fire  Underwriters  operating  uncon- 
sciously as  one  of  these  influences. 

We  have  traced  the  progress  of  an  altogether  re- 
markable development,  probably  the  most  encourag- 
ing example  of  business  evolution  in  American  his- 
tory. American  civilization  was  founded  upon  the 
supremacy  of  individual  rights  and  this  principle 
was  carried  to  a  logical  extreme  in  the  fierce  com- 
petition of  early  insurance  history.  Any  right  when 
asserted  to  that  extent  becomes  a  wrong,  and  the  war 
between  the  companies  in  time  produced  a  condition 
where  the  existence  of  the  business  and  the  protec- 

[226] 


NATIONAL  BOARD  AS  A  CIVILIZING  FORCE 

tion  of  the  policy-holders  were  equally  imperiled. 
It  was  as  a  matter  primarily  of  self-preservation  and 
incidentally  of  public  welfare  that,  on  July  i8,  1866, 
the  National  Board  was  called  into  being. 

Its  early  years  were  spent  in  ''finding  itself." 
They  were  very  human  years.  The  diverse  elements 
were  learning,  painfully,  to  forget  their  diversity 
and  to  think  in  common  terms.  This  was  not  an  easy 
matter.  Success  and  failure  came  in  rapid  alterna- 
tion, and  it  required  the  jolt  of  disaster  to  reduce  the 
discordant  elements  to  harmony,  but  finally  this 
was  accomplished.  For  several  years  following  the 
Chicago  and  Boston  fire  the  National  Board  consti- 
tuted a  virtual  business  monopoly  as  efficient  and  au- 
tocratic as  any  of  the  trusts  and  combinations  of  later 
day.  It  preceded  by  twenty  years  the  Trust  Period, 
when  American  business  began  to  draw  together  in 
great  combinations ;  but  it  bore  the  same  general  char- 
acteristics; it  was  arbitrary  in  its  actions,  and  it  used 
its  power  for  the  increase  of  profits,  by  reducing  com- 
missions and  raising  rates.  The  rates  became  exces- 
sive, as  was  afterward  admitted.  While  the  term  had 
not  yet  become  current,  the  National  Board  of  Fire 
Underwriters  was  in  fact  the  first  great  American 
trust. 

Then  came  a  significant  event — significant,  because 
it  seemed  to  indicate  that  such  combinations  cannot 
become  a  permanent  danger  to  free  institutions,  be- 
cause they  carry  within  them  the  seed  of  correction. 
Through  unconscious  abuse  of  power,  the  National 

[227] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Board  fell  from  the  seat  of  power  and  became  a 
virtual  outcast.  It  was  abandoned  by  all  but  a  few 
of  its  friends  and  retained  but  a  nominal  influence. 
Such  a  fall  was  logically  inevitable;  given  the  same 
conditions  it  would  occur  again. 

At  last  there  arose  from  the  ruins  of  the  old  board 
a  regenerated  organization  animated  by  a  new  spirit. 
Legislative  claims  were  laid  aside.  Autocracy  was 
abandoned.  More  and  more  the  underwriters  came 
to  realize  that  they  had  other  interests  in  common 
than  those  of  rates  and  commissions;  more  and  more 
it  became  evident  that  these  were  interests  in  which 
the  public  also  had  a  share.  The  promotion  of  these 
interests  required  an  organization,  and  the  National 
Board  set  out  upon  the  new  path.  Almost  uncon- 
sciously it  found  itself  playing  the  role  of  a  privately 
supported  public-service  institution,  devoting  a  large 
part  of  its  efforts  to  work  that  was  to  be  of  benefit 
to  the  public.  This  did  not  mean  that  the  under- 
writers had  become  disinterested  philanthropists; 
nothing  was  farther  from  their  thoughts.  Their 
business  instincts  were  as  keen  as  in  the  old  autocratic 
days,  but  they  themselves  were  farther-sighted. 

They  had  learned  to  read  self-interest  in  the  larger 
terms  of  public  service. 

Here  again,  fire  insurance  was  a  generation  in  ad- 
vance of  most  forms  of  business,  but  recently  signs 
have  begun  to  appear  that  a  similar  process  of  evolu- 
tion is  at  work  in  other  lines.  Realizing  mutual  in- 
terests is  a  long  step  toward  true  civilization.     This 

[228] 


NATIONAL  BOARD  AS  A  CIVILIZING  FORCE 

is  one  of  the  respects  in  which  the  National  Board  has 
been  a  civilizing  force,  but  there  are  others  hardly 
less  striking. 

Civilization  moves  slowly  when  it  moves  blindly; 
men  and  nations  make  swifter  progress  when  their 
ideals  are  clearly  before  them.  Fixing  ideal  stand- 
ards is  of  the  essence  of  the  National  Board's  later 
work.  It  has  promulgated  standards  in  building- 
codes,  in  municipal  fire  and  water  departments,  in 
electrical  installations,  in  countless  devices,  materials, 
and  processes  affecting  fire  hazard,  in  the  gathering 
of  statistics,  in  methods  of  adjustment,  and  in  policy- 
and  other  forms  of  contract.  These  standards  have 
been  issued,  not  as  commands  but  as  suggestions;  in- 
fluence has  been  substituted  for  authority.  Wher- 
ever adopted,  and  they  have  been  adopted  widely, 
they  have  bettered  methods  and  improved  conditions. 

The  elimination  of  prejudgment  and  guesswork  is 
a  characteristic  of  advanced  civilization.  Through 
its  Actuarial  Bureau,  its  Underwriters'  Laboratories, 
its  Committee  on  Fire  Prevention,  and  otherwise  the 
National  Board  is  spending  money  and  effort  to  ob- 
tain exact  knowledge  and  to  draw  true  conclusions. 
These  conclusions  affect  the  welfare  of  millions  of 
people  and  they  have  been  widely  recognized  by  na- 
tional, state,  and  municipal  authorities. 

"Conservation"  is  a  new  slogan  in  the  United 
States,  but  the  National  Board  has  long  applied  the 
spirit  of  conservation  in  dealing  with  the  most  inex- 
cusable  form  of  national  extravagance — fire-waste. 

[229] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

In  so  doing,  it  has  exerted  a  beneficent  influence  upon 
all  forms  of  conservation. 

The  manner  in  which  fire  insurance  supports  credit 
and  stabilizes  business  conditions  has  been  described. 
This  is  an  important  element  in  civilization,  and  the 
National  Board  has  had  a  large  part  in  bringing  it 
about. 

Finally,  to  that  pressing  problem  of  modern  civ- 
ilization— the  relations  of  the  corporation  to  the 
state — the  National  Board  has  sought,  and  is  still 
seeking,  to  secure  an  equitable  and  lasting  solution, 
based  not  upon  expediency  but  upon  a  recognition  of 
mutual  interests  and  common  rights.  The  fact  that 
such  a  solution,  if  attained,  must  involve  voluntarily 
unified  legislation  among  many  separate  states  will 
furnish  an  important  precedent  for  joint  state  action 
upon  interstate  matters.  There  are  few  ways  in 
which  American  civilization  could  be  more  benefi- 
cently advanced  than  by  such  means  for  turning  the 
heterogeneous  into  the  homogeneous. 

The  cynic  is  fond  of  regarding  himself  as  the  clear- 
eyed,  the  disillusioned.  There  is,  therefore,  a  cer- 
tain pleasure  in  discovering  a  basis  for  optimism,  un- 
clouded by  illusion  and  existing  where  one  might 
least  expect  to  find  it.  Out  of  the  strife  of  a  highly 
competitive  business,  conducted  by  men  of  very  hu- 
man impulses,  there  has  arisen  an  impersonal  entity 
about  which  the  New  York  State  Investigating  Com- 
mittee, in  very  fairness,  felt  compelled  to  say:     "The 

[230] 


NATIONAL  BOARD  AS  A  CIVILIZING  FORCE 

work  of  the  National  Board  is  in  the  highest  degree 
public-spirited  and  its  activities  are  to  be  highly  com- 
mended." 


[231] 


APPENDIX  I  * 

THE  DEVELOPMENT  OF  THE  AGENCY 
SYSTEM 

1798 — The  Insurance  Company  of  North  America,  Phil- 
adelphia, through  Its  Board  of  Directors  voted,  on 
February  27,  "that  it  Is  not  expedient  to  have  an 
agent  at  Charleston,  authorized  to  take  risks  against 
fire."  (The  first  discovered  reference  to  agency  dis- 
cussion.) 

1804 — The  Phoenix  Fire  Office  of  London  was  repre- 
sented in  New  York  by  Israel  Whelan.  Mr. 
Whelan  had  been  a  wealthy  shipping  merchant  but 
was  brought  to  straitened  circumstances  by  French 
depredations  on  American  Commerce.  Although 
a  member  of  the  Society  of  Friends,  he  had  been  a 
fiscal  agent  of  the  government  during  the  Revolu- 
tion, and  Commissary  General  of  the  Colonial  Army. 
Mr.  Whelan  died  October  21,  1806.  He  was  suc- 
ceeded in  the  management  of  the  Phoenix  Fire  Office 
of  London  by  Israel  Whelan,  2nd,  with  offices  in 
Philadelphia.      (The  first  agency  office.) 

1806 — The  Phoenix  Fire  Office  of  London  represented 
In  New  York  by  Theophilac  and  Andrew  Bach,  with 
"entire  power  to  accept  risks  against  fire  In  the 
United  States,  with  that  discretion  that  their  own 
local  experience  may  dictate."  (The  first  certificate 
of  authority.) 

*  Appendices  prepared  by  Daniel  N.  Handy,  Librarian  of  the  Insurance 
Library  of  Boston. 

[233] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

1806 — The  Eagle  Fire  Company  In  New  York  an- 
nounced that  "the  company  will  receive  applications 
from  any  part  of  the  United  States,  postage  paid, 
with  accurate  and  authenticated  descriptions  of  the 
property  to  be  insured  and  give  immediate  answers 
with  the  amount  of  premiums  that  will  be  charged, 
which  in  all  cases  must  be  paid  at  the  office  of  the 
company  before  their  risk  commences."  (The  first 
mail  order  company.) 

1807 — The  Insurance  Company  of  North  America 
(Philadelphia)  listened  to  a  memorial  from  Mr. 
Alexander  Henry  addressed  to  the  board  of  direc- 
tors on  "extending  insurances  against  fire  to  Lex- 
ington, Kentucky."  A  committee  following  Mr. 
Henry's  memorial,  was  appointed  to  consider  the 
whole  subject  of  the  propriety  of  extending  Insur- 
ances to  cities  and  towns  outside  the  State  of  Penn- 
sylvania. On  December  7,  1807,  the  board  of  di- 
rectors reported  favorably  on  the  proposition  and 
authorized  the  President  "to  appoint  suitable  and 
trusted  persons  at  such  places  as  he  shall  think  ad- 
visable to  act  as  surveyors  and  agents  of  the 
company." 

1807 — Israel  Whelan,  2nd,  In  Philadelphia,  agent  of 
the  Phoenix  Fire  Insurance  Company  of  London 
advertised  as  follows : 

"The  subscriber  agent  for  the  Phoenix  Company  of  London  is 
fully  authorized  to  effect  insurance,  on  houses,  buildings,  stores, 
ships  in  harbor,  goods,  wares  and  merchandise  in  any  part  of  the 
United  States,  from  loss  or  damage  by  fire,  all  terms  so  moderated 
as  will  it  is  presumed  make  it  the  interest  of  all  to  resort  to  a 
measure  so  well  calculated  to  give  additional  security  to  business 
transactions  and  to  afford  protection  from  the  injuries  which  fire 
so  often  occasioned.     In  this  office  no  insured  person  is  liable  to 

[234] 


APPENDIX  I 


any  call  to  make  good  the  losses  of  others  but  in  case  of  fire  the 
sufferer  will  be  fully  indemnified  with  that  liberality  and  prompt- 
ness which  have  always  distinguished  this  Company,  requiring  no 
other  delay  even  where  presumption  of  fraud  appears  than  is 
necessary  to  distinguish  the  honest  sufferer  from  the  fraudulent 
incendiary  .  .  .  since  the  commencement  of  the  office  in  1782  near 
seven  million  dollars  have  been  paid  to  claimants  upon  their 
policies. 

(Signed) 

Israel  Whelan. 

1807 — The  New  York  legislature  passed  an  act  exclud- 
ing foreign  fire  insurance  companies,  but  council  of 
revision  defeats  It.  (This  may  have  been  a  retali- 
atory measure.  At  this  time  America  was  suffering 
from  action  by  England  and  France,  Induced  by  the 
Napoleonic  wars.) 

1808 — The  Insurance  Company  of  North  America  ap- 
pointed as  agents,  Charles  Ellis,  at  Burlington, 
James  Ewing  at  Trenton,  New  Jersey,  and  some  30 
others  including  one  each  In  Cincinnati,  Ohio;  Lex- 
ington, Kentucky;  Carlisle  and  Chambersburg,  Penn- 
sylvania; and  Nashville,  Tennessee.  Agents  were 
to  receive  no  other  fee  or  emolument  than  the  fee 
charged  the  assured  for  surveying  his  risk.  (The 
first  attempt  at  a  general  agency  system.) 

1809 — This  year  In  the  legislature  of  Pennsylvania  a  bill 
was  Introduced  In  the  House  declaring  void  all  poli- 
cies of  Insurance  made  by  any  foreign  Insurance  of- 
fice In  the  State  of  Pennsylvania,  and  Imposing  a 
penalty  upon  any  person  Insuring  In  such  offices. 

1809 — A  bill  to  exclude  foreign  fire  Insurance  companies 
from  New  York  State  again  came  to  the  front  and 
again  failed  of  enactment.     Popular  feeling  at  this 
time  ran  very  high  against  all  foreigners. 
[235] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

1 309 — Maryland  and  South  Carolina  passed  legislation 
denying  to  foreign  insurance  companies  the  right  to 
transact  business  or  to  be  represented  by  agents 
within  their  borders. 

1 8 10 — The  Eagle  Fire  Company  of  New  York  appointed 
an  agent  at  Albany.  During  the  same  year  the  leg- 
islature of  Pennsylvania  in  March  passed  the  bill, 
introduced  in  the  previous  year,  prohibiting  all  in- 
surance by  foreign  corporations,  copartnerships  or 
persons  not  citizens  of  the  United  States.  This  law 
was  aimed  at  the  Phoenix  of  England  whose  Philadel- 
phia agency  had  by  its  over-zealous  competition  in- 
curred the  hostility  of  the  few  local  offices.  The 
president  of  the  Insurance  Company  of  North  Amer- 
ica, writing  to  James  Ewing  at  Trenton,  the  year 
before,  had  declared  that  the  Phoenix  Insurance 
Company  of  London  took  risks  both  in  and  out  of 
Philadelphia,  both  without  much  investigation  and  at 
a  lower  premium  than  they  would  require,  but  that  a 
decided  preference,  notwithstanding,  was  given  to 
their  office  at  higher  premiums;  he  modestly  added 
that  the  reasons  for  this  preference  must  be  judged 
by  people  for  themselves,  since  it  did  not  belong  to 
him  to  assign  them. 

1 8 10 — The  American  Fire  Insurance  Company  of  Phil- 
adelphia was  founded  this  year  with  Mr.  Whelan 
as  one  of  its  promoters.  It  took  over  the  business 
of  the  Phoenix  now  rendered  illegal,  by  the  law 
referred  to.  The  company  immediately  established 
agents  in  various  parts  of  the  State  of  Pennsylvania 
and  advertised  to  accept  risks  by  correspondence. 

1 8 10 — The  Hartford  Fire  Insurance  Company  appointed 
Jonathan  G.  W.  Trumbull  of  Norwich,  Connecticut, 
[236] 


APPENDIX  I 


as  agent,  authorized  to  underwrite  policies  In  that 
town. 
1 8 14 — New  York  State  this  year  passed  a  law  excluding 
foreign  fire  insurance  companies  from  the  state. 
The  preamble  of  the  law  plainly  indicates  that  it 
was  directed  chiefly  against  the  Phoenix  Fire  Insur- 
ance Company  whose  agents  were  in  New  York  City 
and  other  towns  in  the  state. 

Note:  Feeling  against  foreigners  intensified  through 
years  of  bitter  controversy  in  which  American  rights  and 
American  commerce  had  suffered  greatly  on  the  high  seas, 
directed  Itself  against  insurance  corporations  as  against 
other  corporations.  A  note  appended  to  the  New  York 
Act  says,  "During  a  state  of  war  foreigners,  especially 
alien  enemies  cannot  be  coerced  by  any  of  our  courts  of 
justice  to  a  performance  of  their  contracts." 

1 8 14 — Hartford  Fire  Insurance  Company  authorizes 
Ephralm  Kingsbury  at  Hartford,  Connecticut,  "to 
receive  proposals  for  insurance,  to  determine  the 
premiums,  and  to  issue  policies  for  the  company" 
and  allows  him  for  his  services  "the  cost  of  the 
policy." 

18 16 — The  Hartford  Fire  Insurance  Company  appointed 
as  Its  first  agent  outside  of  the  State  of  Connecticut, 
Ebenezer  F.  Norton,  of  Canandalgua,  New  York. 
No  commission  or  remuneration  of  any  kind  was 
paid  to  him  direct,  but  he  was  expected  to  charge  a 
fee  for  surveying  each  risk  and  a  policy  fee  on  each 
policy  written,  both  of  which  fees  he  was  to  retain 
for  his  services. 

1816 — The  Hartford  Fire  Insurance  Company  appointed 
Messrs.  Hooker  and  Brewer,  agents  at  Middlebury, 
[237] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Vermont,  and  allowed  them  a  commission  of  fifty 
cents  on  each  policy  of  over  one  thousand  dollars. 
1823 — New  York  State  enacted  a  law  requiring  agents  of 
companies  of  other  States  to  return  to  the  Comp- 
troller, each  year,  the  amount  of  premiums  received 
in  the  State,  and  to  pay  thereon  a  tax  of  10  per  cent, 
and  to  furnish  a  penal  bond  in  the  sum  of  Five  Hun- 
dred Dollars. 

Note:  This  attempt  to  secure  by  taxation  the  results 
against  all  companies  which  had  been  sought  by  the  act  of 
1 8 14  against  foreign  companies,  was  continued  for  twelve 
years,  until  the  great  conflagration  in  New  York  City  in 
1835,  which  bankrupted  twenty-three  out  of  twenty-six 
local  fire  insurance  companies,  forced  public  opinion  to  a 
more  enlightened  attitude. 

1826 — The  Protection  Fire  Insurance  Company  of  Hart- 
ford, Connecticut,  one  of  the  great  fire  insurance  com- 
panies of  its  day,  was  the  first  company  to  establish 
an  agency  in  the  middle  west.  The  extent  to  which 
it  developed  this  agency  makes  it  justly  entitled  to 
the  claim  of  having  been  the  first  company  to  de- 
velop the  agency  system  as  it  is  known  to-day. 

In  1826,  a  Boston  Merchant,  named  Ephraim 
Robbins,  then  42  years  of  age,  found  himself  in  Cin- 
cinnati, a  financially  ruined  man — his  ruin  having 
been  occasioned  by  disasters  at  sea.  He  was  with- 
out insurance  indemnity  and  so  felt  himself  com- 
pletely broken  in  fortune.  It  was  at  this  time  that 
he  chanced  to  see,  in  an  Eastern  newspaper  sent  him 
by  relatives  in  Hartford,  an  advertisement  of  the 
Protection  Insurance  Company,  then  newly  organ- 
ized and  bidding  for  the  patronage  of  the  pubhc. 
[238] 


APPENDIX  I 


Presumably  having  in  mind  his  own  misfortunes, 
and  the  difference  which  would  have  resulted  had  his 
ventures  been  covered  by  insurance,  Mr.  Robbins 
was  immediately  impressed  with  the  need  of  insur- 
ance and  the  possibilities  of  inducing  the  people 
of  the  middle  west  to  apply  for  it. 

He  went  to  Hartford,  saw  the  officials  of  the 
Protection  Insurance  Company  and  persuaded  them 
to  appoint  him  as  their  agent  with  headquarters  in 
Cincinnati,  then  a  small  town.  Within  the  next 
twenty  years  this  agency  appointed  more  than  two 
hundred  and  fifty  agents,  covering  several  states; 
secured  premiums  amounting  to  three  millions  of 
dollars,  including  premiums  for  Inland  and  marine 
insurance;  paid  substantial  losses;  and,  according  to 
the  sources  from  which  this  information  is  taken, 
realized  for  its  company  during  these  years  a  net 
profit  of  about  lo  per  cent. 

Mr.  Robbins  is  thus  described  by  Mr.  J.  B.  Ben- 
nett, himself  one  of  the  pioneers  in  agency  work 
in  the  middle  west,  in  an  address  delivered  before  the 
Fire  Underwriters  Association  of  the  Northwest, 
in  1876:  "E.  R.  was  a  gentleman  of  the  old  school, 
— aristocratic,  polished  and  of  as  elegant  manners 
as  Chesterfield,  about  the  size  of  Washington, 
slightly  more  corpulent,  straight  as  an  arrow,  sys- 
tematic and  thorough  in  all  his  business,  able  and 
learned  on  political,  social  and  religious  subjects, 
as  well  as  a  thoroughly  good  underwriter,  his  pro- 
found religious  convictions  added  daily  beauty  to 
his  life  and  molded  a  character  of  such  sterling  worth 
and  qualities  in  its  aim  and  usefulness  that  we  who 
are  privileged  to  meet  here  to-day  whether  we  fully 
[239] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

realize  it  or  not  are  almost  as  much  indebted  to  E. 
R.  as  railroads  are  to  George  Stephenson  or  the 
telegraph  is  to  Morse," 

When  Mr.  Robbins  died  In  1846,  his  son  continued 
the  agency  until  1854,  when  the  Protection  Fire  In- 
surance Company  failed,  largely  as  a  result  of  heavy 
losses  incurred  at  the  conflagration  in  St.  Louis  in 
1849,  ^^^  through  its  Marine  Department. 

For  nearly  twenty  years,  the  Protection  Insur- 
ance Company  did  most  of  the  agency  underwriting 
in  the  west.  The  Hartford  and  the  iTltna  had  a 
few  agents  at  more  important  points,  but,  according 
to  Mr.  Bennett,  they  had  less  than  two  dozen  each, 
prior  to  1840. 

In  1845  several  southern  and  western  companies 
endeavored  to  develop  agency  plants  and  some  of 
them,  notably  the  Colonial,  the  Lexington,  the  Ten- 
nessee Fire  and  Marine,  the  Nashville,  and  the  South 
Carolina  companies  succeeded  in  securing  a  foot- 
hold. For  a  time  they  were  better  known  through 
agencies  in  the  west  than  any  eastern  company  ex- 
cept the  Protection  of  Hartford.  Up  to  1845,  ^^^ 
Franklin  of  Philadelphia  had  not  over  six  agencies 
west  of  Pittsburgh.  Mr.  Robbins'  office  became  a 
school  for  training  fire  insurance  men  and  out  of  it 
came  at  least  one  president  of  an  Insurance  company 
and  several  agency  managers.  Its  legal  adviser  was 
Charles  Hammond,  a  prominent  lawyer  at  that  time, 
and  General  Harrison,  afterwards  ninth  president 
of  the  United  States,  was  a  frequent  visitor  at  Rob- 
bins' office. 

Mr.  W.  B.  Robbins,  the  son  who  continued  this 
agency,  seems  to  have  been  a  man  of  entirely  dif- 
[240] 


APPENDIX  I 


ferent  temperament.  He  disliked  the  routine  of 
office  work,  delegated  most  of  his  supervisory  duties 
to  others  and  devoted  his  time  to  finance  and  specu- 
lation, all  of  which  resulted  unprofitably.  Finally 
during  the  Civil  War  he  moved  to  England,  and 
settled  near  Manchester  where  he  is  supposed  again 
to  have  prospered  financially.  His  death  was  a  trag- 
edy involving  both  his  wife  and  his  children.  While 
sailing  in  a  pleasure  yacht  in  St.  George's  Channel 
with  his  family  the  boat  in  some  unaccountable  man- 
ner overturned  and  was  found  floating  later,  bottom 
up.  Nothing  further  was  ever  heard  of  any  of  its 
occupants. 

1829 — The  State  of  Pennsylvania  passes  a  law  forbid- 
ding the  writing  of  insurance  in  companies  organ- 
ized outside  the  state,  whether  in  foreign  countries 
or  other  states  of  the  Union.  Its  object  was  to  pre- 
vent the  writing  of  insurance  in  agencies  of  other 
state  companies,  and  to  compel  its  writing  In  home 
companies. 

1 83 1 — The  Franklin  Fire  Insurance  Company  of  Phila- 
delphia newly  organized,  appointed  an  agent  at  Lex- 
ington, Kentucky,  and,  by  the  attempted  extension 
of  its  business  to  another  state,  sought  to  provoke 
a  discussion  of  the  right  or  desirability  of  a  state 
to  forbid  companies  from  other  states  from  doing 
business  within  its  border.  It  was  the  expectation 
that  Kentucky  officials  being  denied  the  comity  of 
the  State  of  Pennsylvania,  would  raise  the  question 
of  extending  like  comity  to  a  company  from  the  State 
of  Pennsylvania. 

1853 — The  yEtna  established  a  Branch  in  Cincinnati 
with  J.  B.  Bennet  In  charge  of  it,  and  ultimately  suc- 
[241] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ceeded  to  much  of  the  agency  business  which  had 
been  developed  by  the  Protection  Insurance  Com- 
pany. Under  Mr.  Bennet's  direction,  the  JEtn^L 
established  agents  in  the  States  of  Tennessee,  Indi- 
ana, Illinois,  Ohio,  Michigan,  Iowa,  Wisconsin,  Min- 
nesota and  Kentucky. 

For  several  years  beginning  with  1856  Mr.  Ben- 
net  published  for  the  agents  of  the  iEtna,  a  monthly 
insurance  review  styled  the  Insurance  Expositor. 
This  journal  contained  practical  information  regard- 
ing fire  insurance,  fire  hazards,  insurance  legislation 
and  matters  of  insurance  touching  the  i^tna  Insur- 
ance Company.  The  general  agency  established  at 
this  time  became  not  only  the  first  of  its  kind  but 
the  most  extensive. 

As  showing  how  slowly  the  agency  system  ex- 
tended itself  during  the  first  half  century  of  Amer- 
ican fire  insurance,  the  following  material,  gathered 
from  early  reports  of  the  New  York  and  Massa- 
chusetts insurance  commissioners,  may  be  interesting. 

In  1854,  of  sixty-five  stock  fire  insurance  com- 
panies, reporting  to  the  Insurance  State  Official  of 
New  York,  thirty-eight  employed  no  agents  what- 
ever. Of  the  remaining  twenty-seven,  the  Home 
Insurance  Co.  employed  one  hundred  and  forty 
agents;  the  Continental  employed  sixty-three;  the 
Albany  employed  twenty-four;  the  Star  of  Ogdens- 
burg  employed  seventy-five;  and  the  North-Western 
(Oswego)    employed   seventy- four. 

Nineteen  of  the  leading  fire  insurance  companies, 
reporting  to  the  New  York  State  official  in  '56,  em- 
ployed in  the  aggregate  10 17  agents.  The  Mon- 
arch Fire  and  Life  Assurance  Company,  of  London, 
[242] 


APPENDIX  I 


employed  four  hundred  agents.  In  1856,  reporting 
to  the  Massachusetts  Insurance  Commissioner,  the 
Home  Insurance  Company  employed  one  hundred 
and  twenty-seven  agents.  The  Continental  em- 
ployed sixty-seven;  the  Springfield  Fire  and  Marine 
employed  seventy-four;  the  Connecticut  Fire  em- 
ployed twenty-one. 

In  1854,  of  one  hundred  and  forty  agents  em- 
ployed by  the  Home  Insurance  Company,  only 
eighty-eight  were  employed  outside  of  the  State  of 
New  York.  Of  sixty-three  agents  employed  by  the 
Continental,  thirty  were  employed  outside  of  New 
York.  Of  twenty-four  agents  employed  by  the  Al- 
bany only  one  was  employed  outside  of  the  State. 
Of  seventy-five  agents  employed  by  the  Star  of 
Ogdensburg,  only  forty-seven  were  employed  out- 
side of  the  .State. 

These  figures  show  to  how  slight  an  extent  the 
agency  system  had  taken  possession  of  fire  insur- 
ance at  the  end  of  the  first  half  of  the  nineteenth 
century.  Even  the  larger  companies  were  still  local 
companies  confining  their  business  to  the  state  in 
which  they  were  incorporated.  More  than  one- 
half  of  the  companies  in  New  York  State  did  no 
agency  business  at  all. 

In  1856  out  of  thirty-five  Stock  fire  insurance 
companies  reporting  to  the  Massachusetts  Insur- 
ance Commissioner  only  nineteen  reported  them- 
selves as  employing  agents.  The  others  did  almost 
a  local  business. 


[243] 


APPENDIX  II 
AGENCY  COMMISSIONS 

It  has  been  shown  In  citations  already  given  that,  in  the 
beginning,  no  commissions  or  emoluments  of  any  kind  were 
paid  to  any  agent.  They  were  allowed  instead  to  retain 
what  was  known  as  a  policy  fee,  charged  to  the  insured  for 
writing  the  policy,  and  a  survey  fee,  likewise  charged  to 
the  insured,  for  inspecting  his  risk.  Several  of  the  early 
companies,  before  attempting  to  transact  business  through 
agents,  sought  business  by  mail.  As  late  as  1816,  the 
Hartford  Fire  Insurance  Company  appointed  agents  in 
Middlebury,  Vermont,  and  allowed  them  a  commission  of 
but  fifty  cents  on  each  policy,  and  then  only  where  the 
policy  exceeded  One  Thousand  Dollars.  A  little  later, 
5%  was  offered  and  apparently  continued  the  rate  of 
commission  for  many  years. 

In  1856,  the  first  return  of  the  Insurance  Commissioner 
of  Massachusetts  required  that  each  company  filing  its 
statement  should  state  what  commission  it  paid  to  Its 
agents.  The  Howard  paid  10%  ;  the  Old  Colony,  10% ; 
the  Atlantic  Fire  &  Marine,  10%  ;  the  Continental,  10% ; 
the  Webster,  15%;  the  Springfield  Fire  &  Marine,  6  to 
10%;  the  Weston,  of  Massachusetts,  10%;  the  Mer- 
chants', of  Rhode  Island,  10%  ;  the  Connecticut,  of  Hart- 
ford, 10%;  the  Merchants',  of  Pennsylvania,  10%;  the 
Traders  and  Mechanics',  10%  ;  the  Firemen's,  of  South 
Carolina,  10%  ;  the  Keystone,  of  Pennsylvania,  5  and 
10%  ;  the  Monarch  Fire  &  Life  Assurance,  of  London, 
with  Its  four  hundred  agents  reported  that  "the  remunera- 

[244] 


APPENDIX  II 


tlon  to  our  agents  Is  a  very  varied  and  private  arrange- 
ment that  It  would  be  highly  Injurious  to  the  company  to 
disclose." 

That  fire  Insurance  was  still  largely  local  Is  shown,  not 
only  in  the  limited  development  of  the  agency  system,  but 
in  the  actual  distributions  of  amount  at  risk  as  evidenced 
by  reports  to  the  Massachusetts  and  New  York  Insurance 
officials  in  1856. 

New  York  Insurance  companies  reported  at  this  time 
that  the  amount  of  insurance  at  risk  carried  by  them  was 
approximately  $478,131,000.  Of  this  aggregate,  only 
$61,131,000,  approximately,  was  carried  outside  of  the 
state  of  New  York. 

In  1856,  the  Home  Insurance  Company  of  New  York, 
according  to  the  Massachusetts  report,  had  but  five 
agents  in  the  entire  State  of  Massachusetts;  the  ^tna  had 
but  nine,  two  of  whom  were  In  Boston;  the  Hartford  had 
but  seven. 

The  agency  system  was  being  developed  apparently 
with  the  greatest  caution  during  the  early  half  of  the 
century.  It  was  between  the  years  1850  and  1885  that 
the  agency  system  began  to  assume  Its  present  Importance, 
which  enabled  fire  Insurance  companies  to  apply  to  their 
business  the  law  of  average  over  broad  areas,  and  which 
brought  with  it  problems,  trying  alike  to  the  insurer  and 
the  Insured.  The  company  no  longer  was  the  master  of 
Its  own  business.  In  simpler  days  all  of  a  company's 
risks  were  within  easy  reach  of  the  home  office,  even  by 
the  slow  conveyances  then  available,  and  the  secretary,  or 
even  a  committee  of  the  company's  directors,  could  with- 
out great  difficulty  visit  any  property  insured  In  a  day's 
time. 

With  the  development  of  the  agency  system  the  risk 

[245] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

was  removed  from  the  personal  supervision  of  the  com- 
pany's officers.  It  forced  the  company  to  rely  upon  the 
judgment  of  men  who  could  not  always  be  wisely  selected 
or  closely  watched,  and  made  necessary  an  intermediary 
in  the  form  of  the  special  agent.  A  more  serious  prob- 
lem arose  with  the  increasing  importance  of  fire  insurance 
to  commerce,  and  to  society  generally,  when  the  local  agent 
who  was  a  neighbor  of  the  assured  began  to  control  fire 
insurance  risks.  This  control  elevated  him  at  once  to  a 
position  of  supreme  importance.  The  company  no  longer 
dealt  with  the  assured  directly  but  with  the  agent  and  the 
agent  found  himself  in  the  very  pleasing  position  of  one 
who  has  something  to  give  which  very  many  influential 
corporations  are  willing  to  pay  for.  Increasing  competi- 
tion among  companies  led  to  competitive  bidding  for  the 
favor  of  the  agent  until  finally  the  companies  seemed,  un- 
der pressure,  to  have  surrendered  to  the  agent  not  only 
their  right  to  select  and  reject  risks,  but  also  their  right 
to  make  the  rates  and  even  their  right  to  say  what  rate  of 
commission  should  be  paid  to  the  agent  for  his  favor  in 
handing  them  the  risk. 

This  elevation  of  the  agent,  under  stress  of  competitive 
necessity,  to  a  position  of  almost  supreme  authority  over 
so  many  things  which  were  properly  the  province  of  the 
companies,  brought  many  evils. 

The  agent  not  only  determined  the  commission  which 
he  was  to  receive  and  the  conditions  under  which  he  was 
to  turn  the  business  over  to  the  companies,  but,  acting  in 
close  association  with  his  neighbor,  the  assured,  he  seems 
actually  to  have  determined  the  rate  of  premium  which 
was  to  be  paid. 

The  system  is  probably  without  parallel;  so  far  as  the 
insurance  business  is  concerned,  it  resulted  in  a  condition 

[246] 


APPENDIX  II 


of  such  chaos  in  the  '40's  that  the  companies  were  com- 
pelled to  get  together  and  agree  upon  lines  of  united  ac- 
tion. Meetings  of  certain  companies  were  held  in  New 
York  in  1849—50;  Louisville,  Kentucky,  in  1853;  Cincin- 
nati, Ohio,  in  1854;  procedure  was  agreed  upon  as  re- 
gards rates,  and  communicated  to  all  agents  of  companies 
joining  in  the  conference.  The  attempt  of  the  companies 
to  control  their  own  business  seems  to  have  culminated 
later  in  the  organization  of  the  National  Board  of  Fire 
Underwriters.  Here  was  a  supreme  attempt  of  the  com- 
panies to  regain  the  authority  which  through  years  had 
been  gradually  surrendered  into  the  hands  of  others. 
How  strong  the  agency  system  had  become  was  shown  in 
the  inability  of  the  companies,  through  this  powerful  or- 
ganization, to  control  either  the  agents  or  each  other  in 
relations  with  the  agents.  Reaction  followed  and  when 
the  companies  made  the  next  great  effort  to  control  their 
own  business  it  was  in  full  recognition  of  the  fact  that  the 
agency  system,  with  all  Its  powerful  elements  of  control, 
must  be  recognized;  hence,  when  were  formed  the  great 
regional  supervisory  and  rate-making  organizations,  such 
as  the  New  England  Insurance  Exchange,  The  Under- 
writers Association  of  New  York  State  and  the  Middle 
Department,  etc.,  these  recognized  the  local  agent  and 
worked  in  full  cooperation  with  him. 

In  1896,  the  National  Association  of  Local  Fire  In- 
surance Agents  was  formed.  This  association,  with  a 
central  organization,  and  with  branch  organizations  in 
nearly  every  state,  has  tended  to  unify  the  agents  and  in 
many  respects  to  reemphasize  the  importance  of  their 
control  over  the  fire  Insurance  business.  It  has  concerned 
Itself  with  such  matters  as  local  agency  qualifications, 
single  agencies  and  cities,  the  rights  of  agents  over  busi- 

[247] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ness  which  they  have  built  up,  grievances  against  compan- 
ies for  alleged  unfair  practises,  the  appointment  by  com- 
panies of  side  line  agents,  the  direct  and  overhead 
writing  of  business,  and  the  problems  connected  with 
brokerage. 

It  has  also  considered  through  committees  the  prepa- 
ration of  uniform  blanks  to  be  used  in  agency  offices, 
the  legalization  of  the  typewriter  form  of  the  standard 
policy,  the  standardization  of  commission  agreements  and 
in  some  states,  notably  In  some  of  the  southern  and  mid- 
dle-western states,  has  actively  engaged  in  initiating  and 
supporting  fire  insurance  legislation. 

On  the  part  of  the  insurer  the  agency  system  brought 
problems  which  have  been  trying  and  difficult  to  solve. 
Early  in  its  development  the  legislatures  felt  called 
upon  to  establish  the  legal  status  of  the  agent.  Now 
in  most  states,  either  by  statute  or  by  a  clause  Incor- 
porated into  its  standard  policy,  the  agent,  if  appointed  by 
the  company  and  acting  in  its  behalf,  is  considered  the 
company's  agent  in  all  respects,  and  any  knowledge  of 
conditions  possessed  by  the  agent  at  the  time  Insurance  is 
written,  even  though  It  might  constitute  a  waiver  of  cer- 
tain rights  of  the  company,  is  regarded  as  knowledge  of 
the  company  itself. 

The  growing  responsibilities  assumed  by  the  agent  have 
seemed  to  make  necessary  a  higher  standard  of  agency; 
consequently  recent  statutes  have  been  enacted  attempting 
to  fix  standards  of  qualifications,  and  lodging  In  some 
responsible  State  Official  authority  to  license  Insurance 
agents  and  to  reject  applicants  for  licenses  whose  qualifi- 
cations seem  to  render  them  unfit  for  their  responsibilities. 


[248] 


APPENDIX  III 
THE  BROKERAGE  SYSTEM 

During  more  than  one-third  of  the  19th  century  fire 
insurance  business  in  the  city  of  New  York  and  in  other 
more  populous  centers  was  transacted  without  the  pay- 
ment of  commissions  or  brokerage.  There  were  at  first 
in  New  York  City  but  few  fire  insurance  companies  and 
they  worked  together  harmoniously.  Although  no  formal 
association  of  companies  existed  it  was  found  sufficient  to 
work  through  verbal  agreements  of  company  officials.  In 
1 8 19  it  had  become  necessary  to  secure  more  formal  rati- 
fication of  common  plans  and  purposes.  The  Salamander 
Society  so  called,  was  founded,  having  for  its  members 
the  companies  then  doing  business  in  New  York  City. 

Fire  insurance  companies  doing  business  in  New  York 
in  18 19,  were: 

Phoenix  Fire 

New  York  Firemen's 

Eagle  Fire 

Globe 

American 

National 

Franklin  Fire 

Fulton  Fire 

Mechanics'  Fire 

Union 

Merchants'  Fire 

The  Salamander  Society  formulated  rates  and  at- 
tempted to  see  that  they  were  maintained. 

[249] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

In  1826  the  Salamander  Society  being  too  losely  or- 
ganized was  succeeded  by  the  Association  of  Fire  Insur- 
ance Companies  of  New  York.  This  association  rested 
on  two  principles;  ist,  the  maintenance  of  rates;  2nd,  the 
non-payment  of  commissions  or  emolument  of  any  kind 
whatsoever  to  get  the  business.  In  1826  the  following 
companies  were  doing  business  in  New  York  City : 

Dutchess  County  F.  M.  &  L. 

Mutual  Fire 

Eagle  Fire 

Globe  Fire 

Franklin  Fire 

Fulton  Fire 

Manhattan  Fire 

Mechanics'  Fire 

Farmers'  Fire  &  Loan  Co. 

Merchants'  Fire 

North  River  Fire 

Chatham  Fire 

Life  and  Fire  Ins.  Co. 

Hudson  F.  L.  &  Inland  Navigation  Co. 

Utica  F.  &  Inland  Navigation  Co. 

Western  of  Buffalo  F.  &  Inland  Navigation 

Howard  Fire  &  Inland  Navigation 

Traders'  F.  &  Inland  Navigation 

Tradesmen's  Fire  &  Inland  Navigation 

Jefferson  Fire  &  Inland  Navigation 

N.  Y.  Contributionship  Fire 

Phoenix  Fire 

Equitable  Fire  &  Burglary 

yEtna  Fire 

Sun  Fire 

United  States  Fire 

Greenwich  Fire 

Protection  Fire 

Brooklyn  Fire 

Orange  Fire 

[250] 


APPENDIX  III 


N.  Y.  Lafayette  Fire 
Firemen's  Fire 

Among  members  of  the  Association  of  Fire  Insurance 
Companies  were  the  Knickerbocker,  the  Globe,  Eagle, 
Washington,  and  Merchants'.  The  Globe  had  a  capital 
of  one  million  dollars.  The  others  a  capital  of  five  hun- 
dred thousand  dollars  each.  This  Association  exercised 
a  controlling  influence  on  fire  insurance  practise  in  New 
York  City  until  the  great  fire  of  1835  and  the  companies 
which  constituted  it  continued  to  exercise  a  controlling  in- 
fluence for  some  years  afterwards. 

The  broker  first  appeared  in  New  York  approximately 
in  the  '40's.  The  period  from  1843-45  saw  many  new 
companies  formed.  The  old  companies  which  had  built 
up  a  large  and  prosperous  business  without  the  payment  of 
commissions,  endeavored  to  maintain  a  local  organization 
which  should  enforce  the  no  commission  rule.  The  newer 
companies,  however,  felt  themselves  under  the  necessity 
of  obtaining  business  by  the  most  direct  and  rapid  means 
possible.  The  payment  of  a  commission  for  the  business 
suggested  itself  as  one  means  and  a  cutting  of  the  rate 
as  another.  Had  the  older  companies  recognized  the 
inevltableness  of  the  agent  and  the  broker  as  an  intermedi- 
ary between  the  company  and  the  insured  it  is  probable 
that  the  Association  of  Fire  Insurance  Companies  of  New 
York  would  have  continued.  They,  however,  refused 
to  admit  the  necessity  of  either  broker  or  agent 
and  sought  to  continue  the  Association  on  an  uncompro- 
mising no  commission  basis.  A  concession  was  made  finally 
to  avoid  the  disruption  of  the  Association.  This  conces- 
sion consisted  in  permitting  the  payment  of  5%  commis- 
sion. The  new  companies,  however,  most  of  them  having 
declined  to  come  into  the  Association,  offered  commissions 

[251] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

greatly  in  excess  of  5%  and  gradually  encroached  upon 
the  business  of  the  older  companies.  Finally  four  of  the 
larger  companies  subscribing  to  the  By-Laws  of  the  As- 
sociation, withdrew  and  chaos  quickly  followed. 

In  1858  was  organized  the  New  York  Board  of  Fire 
Insurance  Companies,  the  first  company  organization 
frankly  to  recognize  the  necessity  for  paying  a  commission 
to  agents  and  brokers.  The  New  York  Board  in  its  gen- 
eral rules  and  regulations,  Article  IX,  says : 

No  commission  exceeding  5%  upon  the  premium  shall  be 
directly  or  indirectly  paid  for  the  brokering  of  risks  in  the  Cities 
of  New  York,  Brooklyn,  Jersey  City,  or  Hoboken,  except  for 
policy  of  one  thousand  dollars  or  over;  on  such  policies  not  ex- 
ceeding 10%.  No  member  of  this  Board  shall  directly  or  in- 
directly pay  any  commission  or  abatement  to  the  assured  nor  to 
any  clerk  or  other  person  who  is  regularly  employed  by  the  assured, 
nor  to  any  officer  or  employee  of  any  insurance  company  .  .  .  The 
Commission  above  allowed  shall  be  in  full  for  all  services  for 
whatever  name  or  nature  in  relation  to  the  procurement  of  risks 
on  the  payment  of  premium  therefor. 

From  1858  to  1865  the  brokerage  issue  was  uppermost 
in  the  minds  of  fire  underwriters  in  the  larger  cities.  In 
New  York  with  the  formation  of  the  New  York  Board 
of  Fire  Insurance  Companies  and  the  passing  of  the  old 
Association  of  Fire  Insurance  Companies  the  question  of 
brokers  and  brokerage  was  argued  with  great  bitterness. 
The  newer  companies  who  found  the  broker  most  useful 
professed  to  find  a  justification  for  the  broker  in  fire  in- 
surance in  the  brokerage  system  which  had  grown  up  in 
other  lines  of  business.  In  the  sale  of  cotton,  sugar,  grain 
and  other  staples  the  broker  was  deemed  necessary. 
Why  was  he  not  equally  necessary  in  fire  insurance  ?  Offi- 
cers of  the  conservative  companies  retorted  by  saying  that 
there  was  no  resemblance  between  the  fire  insurance  busi- 

[252] 


APPENDIX  III 


ness  and  the  lines  referred  to.  "Why,"  they  asked,  "does 
the  property  owner  having  a  house  to  insure,  need  to  seek 
a  broker  to  bring  the  insurance  for  him?  Will  he  not  find 
in  the  next  street  an  office  whose  character  and  standing 
are  as  well  known  to  him  as  they  are  to  the  broker  ?  Does 
he  have  to  learn  from  a  broker  what  rate  he  must  pay? 
On  the  contrary  does  he  not  know  with  certainty  that  all 
responsible  companies  have  standard  rates  and  that  he 
will  be  charged  no  more  by  one  than  by  another?  Does 
he  not  even  know  that  for  a  company  to  deviate  from  those 
rates  would  make  it  an  object  of  suspicion?"  The  insur- 
ance broker  was  declared  to  be  an  anomaly,  both  useless 
and  dangerous.  An  anomaly  in  that  he  served  the  in- 
sured and  was  paid  by  the  insurer.  Useless  in  that  he  was 
doing  for  the  insurer  precisely  that  work  which  the  officers 
of  companies  were  paid  to  do  for  him.  Dangerous  to  the 
insured  because  in  his  anxiety  to  place  a  risk  and  earn  a 
brokerage,  he  often  concealed  or  misrepresented  material 
facts  affecting  the  character  of  the  risk  which  the  owner 
could  not  do  without  rendering  his  policy  void.  And 
dangerous  to  the  insurer  because  when  acting  through  the 
broker  it  was  impossible  to  determine  the  moral  character 
of  the  risk.  How,  it  was  argued,  could  a  company  know 
the  moral  character  of  the  applicant  unless  it  could  meet 
him  face  to  face?  If  then  the  broker's  position  was  at 
once  anomalous,  useless  and  dangerous,  why  should  he  be 
tolerated?  Finally,  argued  the  conservative  companies, 
the  broker  was  a  menace  to  the  community  because  in  his 
effort  to  get  the  largest  commission  he  would  not  scruple 
to  risk  his  client's  future  in  irresponsible  and  unstable 
companies  since  it  was  companies  of  this  kind  which  paid 
him  the  highest  commission  for  his  business.  A  writer  in 
the  United  States  Insurance  Gazette,  for  Jan.,  1859,  5ays, 

[253] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

that  "the  assumption  that  companies  can  afford  to  pay 
commissions  to  brokers  inspires  the  assumption  that  they 
can  and  ought  to  pay  them  to  the  merchant.  This  assump- 
tion is  fallacious,  however,  because  the  insurer  pays  the 
broker  to  get  business  which  he  otherwise  could  not 
get." 

Despite  the  opposition  of  the  conservative  companies 
the  brokers  continued  to  multiply  and  it  became  apparent 
to  the  more  progressive  of  the  company  officials  that  the 
brokerage  system  must  be  recognized.  The  recognition 
given  it  in  the  new  fire  insurance  organization  was  the 
entering  wedge.  In  1862,  the  brokers  had  so  far  mul- 
tiplied that  they  formed  an  Association  in  New  York  City 
known  as  the  New  York  Board  of  Insurance  Brokers. 
Prior  to  this  time  an  attempt  had  been  made  to  organize 
the  brokers  but  without  long-continued  success. 

Article  II  of  the  By-Laws  of  the  Board  of  Insurance 
Brokers  provided  that  no  person  should  be  admitted  as  a 
member  of  the  Board  unless  he  had  a  place  of  business  and 
devoted  the  most  of  his  time  to  the  occupation  of  insur- 
ance, and  was  at  the  time  of  his  admission  free  from  any 
indebtedness,  for  premiums  collected,  to  any  companies 
recognized  by  the  Board. 

Article  III,  provided  that  a  list  of  companies  recognized 
by  the  Board  should  be  handed  to  each  member  for  strict 
observance,  and  from  time  to  time  should  be  revised  and 
corrected;  and  that  any  member  patronizing  insurance 
companies  not  of  proper  standing  and  not  recognized  by 
the  Board  should  be  liable  to  expulsion,  for  any  risk  put 
in  them  after  due  notice  was  given. 

Article  V,  provided  that  all  members  of  the  Board 
should,  special  risks  excepted,  faithfully  adhere  to  the 
established  rates  fixed  by  the  companies  recognized  by  the 

[254] 


APPENDIX  III 


Board  of  brokers  and  that  any  violation  should  make  the 
party  liable  to  expulsion. 

A  committee  reporting  for  the  local  Board  of  Fire  In- 
surance Companies  in  December,  1862,  says: 

Your  Committee  first  met  the  question  of  brokers  and  brokerage ; 
and  although  by  our  unanimous  opinion  brokers  were  deemed 
unnecessary,  yet  your  Committee  voted  and  now  proposes  a  rule 
that  will  admit  the  payment  of  brokerage  to  others  than  the 
directly  insured.  The  liberal  manner  in  which  this  question  was 
met  by  some  members  of  the  Committee  who  heretofore  in  theory 
and  practice  have  opposed  brokerage,  your  Committee  trusts  will 
have  an  influence  on  other  of  our  fraternity  who  may  have  stronger 
tendencies  for  the  system  than  even  proposed  rules  will  warrant. 
The  rule  proposed  by  the  Committee  in  its  report  was  that  a  com- 
mission not  exceeding  10%  of  the  premium  might  be  paid  to 
brokers  in  the  cities  of  New  York,  Brooklyn,  Jersey  City,  and 
Hoboken,  and  that  this  should  comprise  all  and  every  allowance 
of  whatsoever  name  or  nature  for  all  services  relating  to  the  pro- 
curement of  risks. 

In  December,  1864,  ^  committee  reporting  to  the  Board 
reported  on  the  establishment  of  the  Board  of  Brokers  as 
follows: 

Resolutions  which  have  reference  to  the  establishment  of  a  Board 
of  Brokers  were  by  us  carefully  considered  and  we  came  to  the 
conclusion  that  such  a  Board  would  be  composed  of  some  very 
discordant  materials;  questions  of  strife  for  business,  criminations 
of  unfairness  in  soliciting  and  obtaining  business  that  others  may 
have  had,  or  may  have  deemed  themselves  entitled  to,  might 
arise,  and  if  we  (insurers)  were  individually  or  collectively  en- 
gaged in  their  formation,  appeals  would  be  made  for  our  inter- 
ference, which  had  better  be  avoided.  The  committee  conclude 
it  is  best  for  us  to  deal  with  each  broker  individually,  and  to  bind 
each  individual  to  certain  restrictions,  which,  if  broken  or  avoided 
by  him,  will  put  him  aside  from  dealings  with  us.  We'^pay  him 
for  services  supposed  to  be  rendered  to  us,  and  we  have  a  right  in 
prescribing  rules  and  regulations  to  govern  such  services. 

In  1857  the  Chicago  Board  of  Fire  Underwriters 
through  a  special  committee  on  brokerage  declared: 

[255] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

The  practice  of  paying  commissions  on  risks  brought  to  insurers 
by  persons  commonly  known  as  insurance  brokers  being  generally 
disapproved  by  sound  underwriters  as  having  a  direct  tendency 
to  divert  business  from  its  proper  channels  and  to  introduce  an 
entirely  unnecessary  and  often  unreliable  description  of  men  be- 
tween the  insurer  and  the  insured.  .  .  .Your  Committee  take 
for  granted  that  all  the  me?nbers  of  this  Board  are  agreed  as  to 
the  expediency  of  a  prohibitory  rule  on  that  subject.  .  .  .  Your 
Committee  in  order  to  effect  the  total  suppression  of  the  system  of 
brokerage  in  the  business  of  insurance  in  this  city  consider  it 
absolutely  necessary  to  prohibit  members  of  this  Board  from  hold- 
ing out  pecuniary  inducements  to  any  one  to  bring  business  to 
them. 

The  committee  then  recommended  the  following  resolu- 
tions : 

I.  No  member  of  this  Board  shall  pay  any  commission  to  any 
one  for  risks  which  may  be  offered  for  insurance. 

II.  No  member  of  this  Board  shall  employ  any  solicitor  or 
person  to  hunt  up  business  for  his  office  upon  a  percentage  of  any 
kind. 

These  citations  show  In  a  general  way  the  manner  In 
which  the  brokerage  system  developed  and  the  opposition 
which  for  a  time  marked  Its  development. 

Summarizing,  It  may  be  said  that  In  the  early  years  of 
fire  Insurance  the  business  was  largely  in  the  hands  of  a 
few  strong  companies.  In  New  York  State  where  the 
brokerage  issue  first  arose  the  organization  of  companies 
was  for  many  years  rendered  more  difficult  by  the  necessity 
of  securing  a  special  charter  from  the  legislature  in  each 
case.  This  oftentimes  required  that  the  organizers  of  a 
company  should  themselves,  or  through  their  attorney, 
devote  the  time  of  an  entire  legislature  to  lobbying  in  Al- 
bany in  order  to  get  the  Legislature  to  grant  the  necessary 
charter.  The  character  of  the  petitioners,  their  financial 
responsibility,  the  manner  in  which  they  proposed  to  do 
business,  all  were  likely  to  receive  rather  careful  scrutiny 

[256] 


APPENDIX  III 


from  the  legislative  committee,  to  whom  their  application 
was  referred. 

Necessarily  the  organization  of  new  companies  and  of 
companies  insufficiently  financed  was  not  encouraged  for 
nearly  half  a  century;  therefore  the  few  companies  early 
in  the  field  controlled  the  business  In  New  York  City,  and 
for  a  third  of  a  century  controlled  it  by  direct  writing. 
It  was  not  until  after  the  great  fire  of  1835,  ^^^  ^^e  un- 
doing of  many  of  the  old  companies,  that  new  companies 
began  seriously  to  compete  for  business  in  New  York  City. 
The  influx  of  newer  companies,  especially  of  companies 
organized  on  a  mutual  basis  was  greatly  increased  after 
the  general  insurance  incorporation  law  of  1849,  which 
made  it  no  longer  necessary  for  a  petitioner,  wishing  to 
incorporate  a  fire  insurance  company,  to  secure  a  special 
charter  from  the  legislature.  The  result  was  a  rapid  in- 
crease of  companies,  many  of  them  insufficiently  financed, 
and  promoted  by  men  who  knew  nothing  of  the  fire  in- 
surance business.  It  is  stated  that,  following  the  financial 
panic  of  1835,  many  ruined  business  men  resorted  to  fire 
insurance;  and  that,  after  the  law  of  1849,  it  was  exceed- 
ingly common  for  men  who  had  failed  in  other  lines  of 
business  to  organize  and  to  be  placed  at  the  head  of  fire 
insurance  companies.  Incorporated  under  the  law  of  New 
York  State. 

These  companies  swarmed  Into  New  York  City,  which 
was  then  enjoying  a  period  of  rapid  growth,  and  entered 
immediately  into  severest  competition  with  the  old  com- 
panies for  the  business.  For  the  most  part  they  refused 
to  enter  the  local  association  of  companies,  finding  that 
its  restrictions  placed  them  at  a  serious  competitive  disad- 
vantage. Remaining  outside,  they  sought  to  secure  busi- 
ness by  cutting  rates. 

[257] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

About  this  time — the  idea  undoubtedly  suggesting  itself 
because  of  the  eagerness  with  which  the  new  companies 
were  seeking  business — a  few  individuals  began  to  bring 
the  insurance  of  their  friends  to  certain  offices  in  return 
for  either  a  rebate  of  the  premium  or  a  consideration. 
The  arrangement  proved  to  be  mutually  advantageous. 
One  by  one  in  spite  of  the  protests  of  the  older  companies 
the  newer  companies  increased  their  inducements  to  any- 
body who  would  bring  his  own  insurance  or  that  of  his 
friends  to  their  offices. 

At  first  the  prestige  of  the  older  companies,  and  the 
influence  which  they  wielded  through  their  board  of  un- 
derwriters, secured  them  against  disastrous  encroachments 
on  their  business,  but  gradually  the  competition  affected 
even  the  most  conservative  of  them  and  the  brokerage 
question  found  its  way  into  the  local  underwriters'  asso- 
ciation as  the  issue  which,  in  a  few  years,  was  to  disrupt 
the  association  itself. 

The  brokers  themselves  had  been  undergoing  changes 
in  personnel  which  made  for  the  improvement  of  the  sys- 
tem. Whereas,  in  the  beginning,  only  a  few  generally  ir- 
responsible men  engaged  in  brokerage,  now  many  men  of 
ability  and  integrity  derived  their  entire  livelihood  from 
it.  The  broker's  influence  was  becoming  irresistible. 
While  the  greatest  difference  of  opinion  existed  as  to  his 
value  to  the  Insured,  his  utility  as  a  business  getter  was  no 
longer  to  be  questioned.  He  now  was  able  even  to  bar- 
gain with  companies  and,  since  the  competition  was  grow- 
ing, to  dictate  the  terms  on  which  his  favors  should  be 
distributed.  An  official  of  one  of  the  older  companies 
complained  bitterly  that  the  brokers  habitually  demand  of 
the  companies  that  they  take  his  undesirable  risks  as  the 
absolute  condition  of  receiving  his  desirable  risks.     "It 

[258] 


APPENDIX  III 


is  no  longer  possible,"  said  this  complainant,  "for  those 
companies  which  have  by  years  of  careful  underwriting 
built  up  a  prosperous  and  conservative  business  to  exercise 
that  discretion  which  they  formerly  exercised  in  the  selec- 
tion of  risks.  It  is  the  broker  who  forcibly  determines 
the  company's  selection."  The  ultimate  result  of  such  a 
system  could  not  but  be  disastrous  to  conservative  under- 
writing. 

In  other  cities  the  entrance  of  the  broker  into  the  busi- 
ness as  an  intermediary  between  the  insurer  and  the  in- 
sured, was  noted  and  commented  upon  with  alarm.  Not 
only  fire  insurance  companies  of  the  most  conservative 
type  but  state  officials  as  well  deplored  the  broker's  increas- 
ing power. 

None  of  these  things,  however,  served  to  check  the 
steady  development  of  the  brokerage  system.  Gradually 
with  the  increase  in  numbers  and  influence  of  the  broker, 
he  too  organized  associations;  to-day  it  is  safe  to  say  that 
the  brokerage  system  with  all  its  perplexities  is  here  to 
stay. 

In  June,  1869,  a  Committee  of  the  Senate  of  the  State 
of  Massachusetts  appointed  to  investigate  and  report  on 
the  desirability  of  legislation  to  prevent  the  organization 
of  fire  insurance  companies  to  make  and  maintain  rates, 
devotes  several  paragraphs  to  a  discussion  of  the  broker- 
age system.     The  report  says: 

Massachusetts  companies  usually  confine  their  business  to  the 
City  in  which  they  are  located  and  its  vicinity  and  if  they  employ 
agents  at  all  it  is  only  to  a  limited  extent,  but  on  account  of  the 
ruinous  practise  of  foreign  companies  in  out-bidding  each  other 
for  business  by  the  payment  of  15  to  20%  commissions,  to  agents, 
the  local  companies  as  a  defensive  measure  are  obliged  to  take 
risks  through  brokers.  These  have  become  alarmingly  numerous 
within  the  last  few  years  and  have  greatly  increased  the  cost  of 

[259] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

insurance  all  of  which  is  ultimately  paid  by  the  insured.  .  .  .  The 
agent  is  necessary,  but  why  load  down  the  business  already  over- 
burdened with  taxes  and  charges,  with  the  additional  expense 
of  brokers  who  receive  in  most  cases  iO%  of  the  entire  premium? 
//  any  one  wishes  to  employ  a  broker  why  should  he  not  be  paid 
by  his  principal  as  in  other  business?  It  cannot  be  denied  that  the 
payment  of  exorbitant  commissions  has  multiplied  brokers  to  an 
extent  that  has  brought  discredit,  suspicion  and  prejudice  upon 
the  insurance  interests  of  the  country.  Insurance  brokerage  has 
run  from  the  enormous  charge  of  iO%  of  the  premium  to  the  pay- 
ment by  many  companies  of  15%.  While  others  more  reckless 
pay  20%  or  one-fifth  of  the  entire  premium.  These  commissions 
amount  to  millions  per  annum,  all  of  which  might  be  saved  if  the 
customer  would  meet  the  agent  or  the  officer  of  the  company  face 
to  face. 

It  seems  to  your  Committee,  that  the  national  and  local  boards 
of  fire  underwriters  aim  to  and  will  if  not  interfered  with,  elimi- 
nate this  great  evil  of  excessive  commissions  and  also  eventually 
that  of  brokerage  except  in  the  cases  of  very  large  amounts  where 
the  assured  will  employ  and  pay  his  own  broker. 

(By  Massachusetts  Senate,  No.  385,  June  8,  1869.) 


[260] 


APPENDIX  IV 
STATE  SUPERVISION 

Legislation  concerning  fire  Insurance  appears  very  early 
in  the  Legislative  history  of  this  country.  Originally 
special  charters  were  granted  to  fire  insurance  companies. 
These  charters  defined  the  powers  of  the  corporation  and, 
in  some  of  the  early  Massachusetts  companies,  introduced 
an  element  of  state  supervision  by  requiring  that  the  finan- 
cial affairs  of  the  corporation  be  from  time  to  time  re- 
ported on,  and  by  limiting  the  proportion  of  the  value 
of  buildings  which  should  be  covered  by  insurance;  also 
by  limiting,  in  the  case  of  mutual  companies,  the  extent 
and  amount  of  assessments.  In  Massachusetts,  in  1807 
(Acts  and  Resolves,  Ch.  56),  insurance  companies  were 
called  upon  to  render  an  account  of  their  affairs  to  the 
next  General  Court;  the  account,  however,  consisting 
merely  in  a  statement  of  the  amount  of  capital  stock  ac- 
tually paid  in,  the  character  and  amount  of  funds  in  which 
the  same  was  invested,  and  the  amount  of  outstanding 
risks. 

In  1820,  an  Act  was  passed  authorizing  all  insurance 
companies  Incorporated  in  Massachusetts  to  Insure  against 
fire,  a  right  which  heretofore  had  been  delegated  by  spe- 
cial charter. 

They  were  authorized  "in  addition  to  the  powers 
granted  by  their  respective  charters,  to  make  Insurance 
against  fire  on  such  terms  and  conditions  as  may  be  agreed 
upon  by  the  parties  on  any  dwelling  houses,  or  other  build- 
ings and  on  merchandise  or  other  property  within  the 

[261] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

United  States :  provided  always y  that  no  sum  shall  be  in- 
sured on  any  one  risk  against  fire  exceeding  lo  per  centum 
of  the  capital  stock  actually  paid  in  of  said  insurance  com- 
pany." Here  we  find  a  limitation  on  the  writing  capacity 
of  fire  insurance  companies  which  has  remained  substan- 
tially the  same  for  nearly  a  century. 

In  1827,  there  was  passed  an  act  providing  that  the 
agent  of  a  foreign  company  should,  before  transacting 
business  for  it  within  the  State,  file  with  the  treasurer  of 
the  commonwealth  a  copy  of  its  charter  and  of  its  letter 
of  attorney  granted  to  him,  under  penalty  for  neglecting 
to  do  so  of  Five  Hundred  Dollars,  of  which  one-half  was 
payable  to  the  informer.  The  act  also  required  that  the 
agent,  under  penalty,  should  file  with  the  state  treasurer 
a  sworn  statement  of  the  financial  condition  of  the  com- 
pany, and  should  publish  the  same  in  some  newspaper  in 
the  county  in  which  his  agency  was  established.  Compan- 
ies were  required  to  have  a  paid-up  cash  capital  of  $200,- 
000  and  to  swear  that  they  would  insure  in  no  single  risk 
an  amount  greater  than  10%  of  that  capital;  should  an 
agent  write  a  policy  of  insurance  in  a  company  violating 
this  provision  he  could  be  made  to  forfeit  five  hundred 
dollars  penalty. 

In  1832,  Massachusetts  passed  an  act,  concerning  com- 
panies incorporated  in  the  commonwealth,  imposing  addi- 
tional obligations  upon  them  and  making  them  liable  to 
taxation  under  any  general  law  providing  for  taxation  in 
the  State.  In  the  same  year  there  was  passed  in  Massa- 
chusetts an  act  requiring  agents  of  companies  from  outside 
of  the  state  to  give  "bonds  of  five  thousand  dollars,  to 
make  semi-annual  returns  of  the  amount  of  business  writ- 
ten by  them,  and  to  pay  on  premium  receipts  a  tax  of 

[262] 


APPENDIX  IV 


Then  followed  during  the  next  few  years  acts  regulat- 
ing mutual  companies,  acts  authorizing  companies  to  in- 
vest parts  of  their  capital  stock  in  the  stock  of  any  cor- 
poration established  in  Massachusetts  whose  corporate 
property  should  consist  entirely  of  real  estate,  or  in  the 
funded  debt  of  any  Massachusetts  city  or  town. 

In  1837,  the  State  of  Massachusetts  passed  a  law  re- 
quiring each  insurance  company  having  a  specific  capital 
to  make  annual  returns  to  the  secretary  of  state,  instead 
of  to  the  treasurer  as  had  been  enacted  previously,  and 
establishing  by  statute  a  form  of  return  containing  twenty- 
one  questions.  These  questions  were  intended  to  show 
the  location,  name  and  capital  stock  of  the  company;  the 
manner  in  which  funds  were  invested,  including  invest- 
ments in  Massachusetts  stocks,  United  States  stocks,  loans 
on  bottomry  and  respondentia,  invested  in  real  estate  se- 
cured by  mortgage  on  same,  loans  on  collateral  or  per- 
sonal security,  cash  on  hand,  due  on  book,  and  reserve 
funds.  In  the  case  of  bank  stocks  a  blank  space  was  pro- 
vided for  inserting  the  names  and  amounts  owned  in  each. 
Then  followed  a  group  of  questions  intended  to  show  the 
amount  due  from  the  companies'  offices,  including  debts 
owed,  losses  as  ascertained  and  unpaid,  amount  of  losses 
exclusive  of  salvage,  amount  at  risk — fire,  amount  at  risk 
— marine,  average  annual  dividend,  highest  rate  of  inter- 
est paid  or  discount  received  on  any  one  loan,  and  the 
amount  of  bank  stock,  returned  as  being  owned  by  the 
companies,  which  was  pledged  as  security  for  money  bor- 
rowed. 

The  secretary  of  the  commonwealth  was  required  to 

submit  in  print  at  the  next  session  of  the  Legislature,  "a 

true  abstract  from  the  return  with  each  column  of  the 

,  abstract    truly    added    up."     The    increasing    develop- 

[263] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ment  of  railroad  properties  with  their  demand  for  huge 
sums  of  money  and,  probably,  the  growing  attractiveness 
of  such  properties  for  investment,  appear  in  special  enact- 
ments in  Massachusetts,  between  1838  and  1848.  A  law 
was  then  passed  permitting  insurance  companies  to  invest 
one-third  of  their  capital  in  the  stocks  of  railroad  compan- 
ies incorporated  within  the  state,  although  not  more  than 
one-fifth  of  their  capital  might  be  invested  in  the  stock  of 
any  one  railroad. 

Companies  were  now  required  through  their  directors 
to  make  quarterly  sworn  statements,  signed  by  their  presi- 
dent and  secretary,  setting  forth  the  financial  condition  of 
the  company,  and  if  any  reduction  appeared  in  the  capital 
stock  of  a  company  its  risks  were  to  be  correspondingly 
reduced.  In  1842,  Massachusetts  required  mutual  fire 
and  fire  and  marine  companies  to  make  returns  of  their 
financial  conditions;  the  returns  were  to  be  made  to  the 
Secretary  of  State  and  a  form  for  making  this  return  was 
prescribed. 

In  the  early  '40's,  the  unpleasant  experience  of  the  state 
and  of  the  community  with  irresponsible  promoters  who 
traded  on  the  charter  of  dormant  companies,  led  to  the 
passage  of  a  law  requiring  incorporated  companies  to  file 
notice  within  ten  days  of  incorporation,  specifying  their 
acceptance,  refusal  or  of  discontinuance  of  their  respec- 
tive charters.  The  notice  was  to  be  filed  with  the  Secre- 
tary of  State,  and  failure  of  notice  of  acceptance  within 
one  year  was  to  work  a  forfeiture  of  the  charter. 

In  1847,  Massachusetts  passed  an  act  making  every 
person,  who  should  so  far  represent  in  the  state  any  insur- 
ance companies,  incorporated  in  any  other  state  or  coun- 
try, as  to  receive  or  transmit  proposals  for  insurance  or  to 
receive  for  delivery  any  policy  founded  thereon,  or  other- 

[264] 


APPENDIX  IV 


wise  to  procure  insurance  by  such  companies  for  persons 
residing  in  the  state,  the  agent  of  said  company,  and  mak- 
ing him  liable  to  the  restrictions  and  penalties  applicable 
to  such  an  agent. 

In  1849,  Massachusetts  permitted  mutual  companies  to 
insure  property  included  within  the  terms  of  their  charter, 
situated  outside  of  Massachusetts  but  within  the  New  Eng- 
land States  and  the  State  of  New  York.  All  such  prop- 
erty must  be  classified  into  two  classes,  to  be  designated 
"Less  Hazardous"  and  "More  Hazardous."  The 
policy  in  each  case  was  to  show  the  class  to  which  the  prop- 
erty belonged,  and  the  premiums  and  the  notes  on  the  two 
classes  were  to  be  kept  separate.  No  policy  was  to  be 
issued  in  either  class  until  the  sum  of  $100,000  should  be 
insured  thereon. 

In  1850,  Massachusetts  by  law  permitted  certain  mill 
corporations  in  the  City  of  Lowell  mutually  to  insure  each 
other  against  fire  (Acts  1850,  Ch.  65). 

In  185  I,  Massachusetts  passed  an  act  providing  for  the 
appointment  of  an  attorney  to  accept  services  for  foreign 
insurance  companies,  with  heavy  penalties  attached  for 
negligence,  including  fine  of  $301,000  for  disability  there- 
after to  collect  premiums  or  assessments,  i^gents  were 
required  to  give  bonds  in  five  thousand  dollars,  to  make 
annual  returns  of  the  business,  and  to  pay  a  tax  of  1%  on 
premiums,  and,  in  case  of  mutual  companies,  on  assess- 
ments as  well. 

In  1852,  Massachusetts  constituted  the  secretary,  treas- 
urer and  auditor  of  the  commonwealth  a  board  of  insur- 
ance commissioners  to  examine  annually  in  the  month  of 
November  the  statements  and  returns  made  by  foreign 
companies  and  their  agents  and  to  prepare  and  submit  to 
the  legislature  an  abstract  of  said  statements  returned. 

[265] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

The  following  year,  the  legislature  authorized  the  Gov- 
ernor to  appoint  two  commissioners  to  revise  and  compile 
into  one  act  all  the  general  statutes  of  the  commonwealth 
upon  the  subject  of  insurance. 

In  1854,  Massachusetts  passed  a  twenty-page  act  which 
codified  all  the  insurance  laws  of  the  commonwealth  re- 
maining in  force,  including  several  revised  forms  of  return 
for  the  use  of  stock  and  mutual  companies  as  prepared  by 
the  commissioner  in  1853. 

This  codification,  the  work  of  the  two  commissioners 
appointed  the  previous  year,  was  the  first  of  this  kind  in 
the  State  of  Massachusetts. 

The  first  official  report  of  the  business  of  insurance  com- 
panies published  by  the  State  of  Massachusetts  was  com- 
piled by  John  P.  Bigelow,  secretary  of  the  commonwealth 
in  accordance  with  instructions  contained  in  Ch.  192  of 
the  Act  of  1837.  It  was  transmitted  to  the  Legislature 
in  1839  under  the  title  "Abstract  of  the  Returns  of  In- 
surance Companies,  incorporated  with  specific  capital; 
exhibiting  the  condition  of  those  institutions  on  the  first 
day  of  December,  1837." 

This  report  consisted  of  eight  pages.  It  covered 
Massachusetts  companies  only,  then  48  in  number,  29  of 
these  being  in  Boston;  19  were  in  other  parts  of  the  State. 
They  had  an  aggregate  capital  of  $9,415,000  with  risks 
outstanding  amounting  to  $139,808,644. 

The  incompleteness  of  this  report  is  indicated  by  Mr. 
Bigelow's  introductory  paragraph  in  which  he  says :  "As 
these  corporations  are  not  required  by  law  to  file  any 
notice  with  this  Department  of  the  acceptance  or  discon- 
tinuance of  their  charters,  I  had  no  official  or  certain 
knowledge  of  what  offices  were  or  were  not  in  actual  ex- 
istence.    Blanks  were   .   .   .   forwarded  to  the  addresses 

[266] 


APPENDIX  IV 


of  such  as  were  commonly  supposed  to  be  in  operation." 
From  1837  u'^til  1856,  the  secretary  of  the  common- 
wealth of  Massachusetts  submitted  returns  of  insurance 
companies  doing  business  in  the  state  under  forms  sub- 
stantially the  same  as  they  used  in  1837. 

In  1855  was  established  in  the  State  of  Massachusetts 
a  Board  of  Insurance  Commissioners  the  beginning  of  de- 
partmental insurance  supervision  which  has  continued  un- 
der somewhat  varying  forms  down  to  the  present  time. 

APPROXIMATE  DATES  OF  ESTABLISHMENT  OF  INSURANCE 

SUPERVISION    IN    THE    SEVERAL    STATES    OF 

THE    UNITED    STATES 

The  increasing  importance  of  fire  insurance,  and  the 
multiplication  of  laws  having  to  do  with  fire  insurance  and 
fire  insurance  companies,  have  in  each  State  led  ultimately 
to  the  establishment  of  a  bureau  or  separate  department, 
administered  by  a  designated  official,  to  have  charge  over 
and  supervision  of  insurance. 

Massachusetts  and  New  York  State  early  required  state- 
ments from  the  companies.  Organized  supervision  in  the 
several  States  may  be  said  to  have  been  developed  as  fol- 
lows: 

1852 — Vermont.  Insurance  department  organized  No- 
vember 23,  1852.  Administered  by  secretary  of 
state  and  state  treasurer  as  insurance  commissioner. 
Elected  by  the  people  for  two  years. 

1852 — New  Hampshire.  Department  organized  1852; 
administered  from  1852-59  by  a  board  of  three 
commissioners.  Administered  from  1870  to  date 
by  a  commissioner  appointed  by  the  Governor  with 
the  approval  of  the  executive  council  for  three  years. 
[267] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

1852 — Indiana.  Insurance  supervision  lodged  with  the 
auditor  of  state,  1 852-1 865.  Insurance  depart- 
ment organized  December  21,  1865.  Administered 
from  1865  to  date  by  auditor  of  state,  elected  by  the 
people  for  two  years. 

1855 — Massachusetts.  In  1837  Acts,  Ch.  192,  compa- 
nies were  required  to  make  annual  returns  to  the 
secretary  of  the  commonwealth.  First  report  was 
made  January,  1838.  Insurance  department  was 
organized  April  3,  1855;  administered  from  1855 
to  1858  by  board  of  three  commissioners;  from 
1858  to  1866  by  board  of  two  commissioners;  from 
1866  to  date  by  one  commissioner  appointed  by  the 
Governor  for  three  years. 

1856 — Rhode  Island.  Insurance  department  established 
under  board  of  three  commissioners  in  1856—63. 
Insurance  department  organized  as  a  separate  de- 
partment May,  1862.  Administered  by  state  aud- 
itor and  insurance  commissioner.  Elected  annually 
by  legislature  from  1862  to  date. 

1857 — Mississippi.  Auditor  of  public  accounts  en- 
trusted with  supervision  of  insurance  and  adminis- 
tration of  insurance  laws.  Insurance  department 
organized  January,  1902.  Administered  by  state 
auditor  in  1902-03;  from  1904  to  date  by  insurance 
commissioner  elected  by  the  people  for  four  years. 

i860 — New  York  State.  By  laws  of  1853  ^^'^  1854  the 
comptroller  of  the  state  was  required  to  receive  and 
prepare  reports  on  the  annual  statements  of  the 
several  fire  insurance  companies  of  the  State  of  New 
York,  and  of  other  states  of  the  United  States  au- 
thorized to  do  business  in  New  York.  In  his  first 
report,  James  M.  Cook,  comptroller,  says,  under 
[268] 


APPENDIX  IV 


date  of  February  17,  1855  :  "In  preparing  the  fol- 
lowing tables  the  comptroller  respectfully  refers  the 
legislature  to  his  annual  report  of  the  present  year 
as  containing  all  the  suggestions  and  recommenda- 
tions which  he  deems  necessary  to  present  for  their 
consideration,  believing  that  the  present  condition  of 
the  companies  of  this  state  .  .  .  establishes  conclu- 
sively evidence  of  immediate  need  of  legislation  for 
the  protection  of  .  .   .   its  citizens." 

Insurance  returns  made  to  the  comptroller  in 
years  1855  ^^  i860.  Insurance  department  organ- 
ized January  i,  i860.  Administered  from  i860  to 
May,  1862,  by  superintendent;  from  May,  1862, 
to  1872,  by  deputy  and  acting  superintendent;  from 
November,  1872,  to  February,  1876,  by  superin- 
tendent; from  February,  1876,  to  February,  1877, 
by  deputy  and  acting  superintendent;  from  Feb- 
ruary 1877,  to  January,  1909  (date),  by  superin- 
tendent. 

i860 — Alabama.  Supervision  of  insurance  companies 
placed  in  i860  under  state  auditor.  Insurance  de- 
partment organized  February  18,  1897.  Admin- 
istered by  secretary  of  state  who  is  ex-officio  insur- 
ance commissioner.  From  1897  to  1900  ofEce  ad- 
ministered by  deputy  insurance  commissioner. 

1864 — Nevada.  Insurance  supervision  lodged  with 
comptroller  of  the  state.  Insurance  department  or- 
ganized February  3,  1881;  administered  by  state 
comptroller,  who  is  elected  by  the  people  for  four 
years. 

1865 — West    Virginia.     Insurance    supervision    lodged 
with   auditor   of   state.     Insurance   department   or- 
ganized  1867.     Reorganized   1907.     Administered 
[269] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

from  1865  to  1907  by  state  auditor;  from  1907  to 
date  by  auditor  as  ex-officio  insurance  commissioner. 
Term,  four  years. 

1865 — Connecticut.  Organized  July,  1865.  From 
1865  ^^  d^^^  administered  by  insurance  commis- 
sioner, appointed  by  Governor. 

1866 — Virginia.  Insurance  supervision  under  auditor 
of  public  accounts.  Insurance  department  organ- 
ized August  2,  1906,  as  a  bureau  within  the  depart- 
ment of  corporations.  Administered  by  insurance 
commissioners  elected  for  four  years  by  joint  vote 
of  the  legislature. 

1867 — Wisconsin.  Insurance  supervision  entrusted  to 
secretary  of  state  in  1867-78.  Insurance  depart- 
ment organized  1878;  administered  by  insurance 
commissioners  elected  by  people  for  three  years. 

1867 — Ohio.  Auditor  of  state  charged  with  supervi- 
sion of  Insurance  from  1867  to  1871.  Insurance 
department  organized  March  12,  1872;  adminis- 
tered from  1872  to  date  by  Superintendent  of  In- 
surance, appointed  by  Governor  for  three  years. 

1868 — California.  Organized  May  5,  1868.  Admin- 
istered by  commissioner,  appointed  by  Governor, 
from  1868  to  date. 

1868 — Iowa.  Insurance  supervision  as  early  as  1846 
placed  under  the  auditor  of  state.  No  insurance 
department,  but  by  custom  the  supervision  of  Insur- 
ance is  continued  under  the  auditor  of  state,  who  Is 
elected  for  two  years  by  the  people. 

1868 — Maine.  Insurance  department  created  in  1868. 
Administered  by  commissioner,  appointed  by  Gov- 
ernor for  three  years,  from  1870  to  date. 

1869 — Missouri.     Insurance       department       organized 

[270] 


APPENDIX  IV 


March  4,  1869.  Administered  by  superintendent, 
appointed  by  Governor  for  four  years,  from  1869 
to  date. 

1869 — Georgia.  Insurance  affairs  under  state  comp- 
troller general  from  1869  to  1887.  Department 
of  insurance  organized  October,  1887,  with  comp- 
troller general  ex-officio  insurance  commissioner, 
from  1887  to  date.  Elected  by  people  for  four 
years. 

1869 — Illinois.  Auditor  of  public  accounts  charged  with 
supervision  of  insurance  from  1869  to  1893.  In- 
surance department  created  July  i,  1893;  admin- 
istered by  superintendent  appointed  by  Governor, 
for  four  years. 

1870 — Kentucky.  Insurance  department  organized 
1870  as  bureau  of  the  state  auditor's  department; 
administered  by  commissioner  appointed  by  state 
auditor  for  four  years. 

1 87 1 — Kansas.  Insurance  department  organized  March 
21,  1 871;  administered  1871  to  date  by  Superin- 
tendent, appointed  by  Governor  for  four  years. 

1871 — Michigan.  Organized  April  14,  1871;  admin- 
istered from  1 87 1  to  date  by  commissioner,  ap- 
pointed by  Governor  for  two  years. 

1872 — Florida.  Insurance  department  organized  1872; 
administered  by  state  treasurer,  elected  by  the 
people. 

1872 — Maryland.  Insurance  department  organized 
1872.  Administered  by  commissioner  appointed 
by  the  board  of  public  works,  consisting  of  the  Gov- 
ernor, and  state  treasurer  and  the  state  comptroller, 
for  four  years. 

1872 — Minnesota.     Insurance      department     organized 

[271] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

1872;  administered  by  commissioner,  appointed  by 
Governor  for  two  years,  in  years  1872  to  date. 

1873. — Arkansas.  Insurance  department  organized 
April  25,  1873;  administered  by  auditor  of  state 
and  insurance  commissioner,  elected  by  the  people. 

1873 — Nebraska.  Insurance  department  organized 
June  I,  1873;  administered  by  auditor  of  public 
accounts,  elected  for  two  years. 

1873 — Pennsylvania.  Insurance  department  organized 
April  4,  1873;  administered  by  commissioner  ap- 
pointed by  Governor  for  three  years. 

1873 — Tennessee.  Organized  insurance  department  in 
1873;  administered  by  treasurer  as  ex-officio  insur- 
ance commissioner,  appointed  by  Governor  for  two 
years. 

1875 — New  Jersey.  Insurance  supervision  entrusted 
1875— 1890  to  secretary  of  state  as  insurance  com- 
missioner, ex-officio.  Insurance  department  organ- 
ized February  10,  1891;  administered  from  1891 
to  date  by  commissioner  of  banking  and  insurance, 
appointed  by  Governor,  for  three  years. 

1876 — Texas.  Insurance  department  organized  Septem- 
ber I,  1876;  administered  by  commissioner,  ap- 
pointed by  Governor,  from  1876  to  date.  Re-or- 
ganized 1907.  Insurance  department  under  insur- 
ance commissioner  from  1907  to  date. 

1876 — South  Carolina.  Insurance  supervision  under 
comptroller  general  with  limited  authority  from 
1876  to  1908.  Insurance  department  organized 
February  24,  1908;  administered  by  commissioner, 
elected  by  legislature  for  a  four-year  term. 

1877 — Wyoming.     Territorial  auditor  in  charge  of  in- 
surance from  1844  to  1896.     Insurance  department 
[272] 


APPENDIX  IV 


organized  1897;  administered  by  auditor  as  ex-offi- 
cio  insurance  commissioner. 

1879 — Delaware.  Insurance  department  organized 
March  24,  1879;  administered  by  commissioner, 
elected  for  four  years. 

1882 — New  Mexico.  Insurance  supervision  from  1882 
to  1904  under  territorial  auditor.  Insurance  de- 
partment organized  April  i,  1905;  administered  by 
superintendent,  appointed  by  Governor  for  two 
years. 

1883 — Montana.  Insurance  supervision  by  territorial 
auditor  from  1883  to  1889;  by  state  auditor  from 
1889  to  1909.  Insurance  department  organized 
1909;  administered  by  auditor  as  insurance  com- 
missioner ex-officio,  elected  by  people,  for  four 
years. 

1883 — Colorado.  Insurance  department  organized 
February  13,  1883;  administered  from  1883  ^^  1894 
by  superintendent;  from  1895  ^o  1907  by  state 
auditor  as  ex-officio  superintendent;  from  1907  to 
date  by  insurance  commissioner  appointed  by  Gov- 
ernor. 

1884. — Utah.  Insurance  supervision  under  territorial 
secretary  from  1884  to  1896.  Insurance  depart- 
ment organized  1896;  re-organized  April  7,  1909; 
administered  from  1896  to  1909  by  secretary  of 
state  as  ex-officio  insurance  commissioner;  from  1909 
to  date  by  commissioner  appointed  by  Governor. 

1887 — Arizona.  Territorial  supervision  of  insurance 
vested  in  territorial  treasurer  from  1887  to  1901. 
Insurance  department  organized  September  i,  1901, 
under  secretary  of  territory. 

1889 — North  Dakota.     Insurance  department  organized 

[273] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

October  i,  1889;  administered  by  insurance  com- 
missioner, elected  for  two  years. 

1889 — Washington.  Insurance  department  organized 
November,  1889.  Insurance  supervision  vested  in 
secretary  of  state  as  ex-officio  insurance  commis- 
sioner. Insurance  department  administered  by  in- 
surance commissioner,  established  November,  1908. 
Commissioner  elected  by  people  for  four  years. 

1889 — South  Dakota.  Insurance  supervision  vested  in 
state  auditor  from  1889.  Insurance  department 
organized  1897;  administered  by  insurance  commis- 
sioner, appointed  by  Governor  for  two  years. 

1890 — Oklahoma.  Insurance  department  organized 
May  2,  1890.  Administered  from  1890  to  1897 
by  secretary  of  territory  as  ex-officio  insurance  com- 
missioner; by  insurance  commissioner,  appointed  by 
Governor,  from  1907  to  date. 

1 89 1 — Idaho.  Insurance  supervision  lodged  with  State 
Treasurer  from  1891-1901.  Insurance  department 
organized  1901;  administered  by  insurance  commis- 
sioner, appointed  by  Governor  for  two  years. 

1898 — Louisiana.  Insurance  department  organized 
1898 ;  administered  by  secretary  of  state  as  ex-officio 
superintendent  of  insurance. 

1900 — Alaska.  Insurance  department  organized  June 
6,  1900;  administered  by  surveyor-general  as  ex- 
officio  secretary  of  the  territory. 

1902 — District  of  Columbia.  Insurance  department  or- 
ganized January  i,  1902;  administered  by  superin- 
tendent of  insurance. 


[274] 


APPENDIX  V 
VALUED  POLICY  LEGISLATION 

The  valued  policy  In  fire  Insurance  may  be  defined  as 
a  contract  In  which,  in  case  of  total  loss  of  the  property 
insured,  the  sum  mentioned  in  the  face  of  the  policy  is  the 
sum  to  be  paid  to  the  Insured,  irrespective  of  the  value 
of  the  property  to  the  insured  at  the  time  of  Its  loss. 

The  principal  objection  to  a  valued  policy  Is  that  it 
violates  the  essential  principle  of  fire  insurance,  which  is 
indemnity.  The  loser  should  by  his  foresight  In  effecting 
insurance  be  restored,  in  case  of  loss,  to  precisely  the 
position  In  which  he  was  Immediately  before  the  loss 
occurred.  His  loss  should  not  become  a  source  of  profit. 
Immediately,  It  having  become  a  source  of  profit  to  him 
to  lose  his  property  by  fire,  the  contract  ceases  to  be  one 
of  insurance  and  becomes  one  of  wager,  with  all  Its  induce- 
ments to  fraud  and  crime. 

Curiously  enough,  historically  considered,  the  first 
valued  policy  law  passed  in  the  United  States  was  intended 
to  prevent  over-insurance,  the  very  thing  which  opponents 
of  this  kind  of  legislation  believe  to  be  the  Inevitable 
result  of  valued  policy  laws,  unless  the  closest  oversight 
is  maintained  by  the  Insurer. 

The  first  valued  policy  law  was  passed  by  the  State 
of  Wisconsin  in  1874.  It  was  styled  "An  act  to  prevent 
over-insurance."  It  probably  owed  its  origin  partly  to 
the  belief  that  fire  insurance  companies,  acting  through 
their  agents,  habitually  accepted  insurance  In  excess  of 
the  value  of  the  property,  depending  upon  the  adjustment 

[275] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

to  scale  down  the  loss  payment  to  the  point  of  safety. 
The  consequence  of  this  practise,  so  the  assured  believed, 
was  to  over-collect  premiums  and  to  under-pay  losses. 
Wisconsin  was  at  this  time  largely  a  farming  community. 
Mr.  Cornelius  Walford  points  out  that  it  was  largely 
peopled  by  persons  who  themselves  (or  whose  ancestors) 
came  from  central  and  northern  Europe,  where  systems 
of  State  and  Municipal  Insurance  had  existed  for  genera- 
tions. Mr.  Walford  suggests  that  the  European  prac- 
tise of  carefully  valuing  buildings,  and  of  fixing  the  value 
through  Municipal  or  State  Surveyors,  may  have  been  in 
the  background  of  the  minds  of  those  who  insisted  upon 
buildings  being  similarly  valued  in  Wisconsin.  But  he 
notes  this  distinction,  that  while  the  valuation  of  buildings 
by  state  and  municipal  insurance  organizations  in  Europe 
was  common,  it  was  preceded  by  thorough  appraisal, 
was  followed  by  frequent  and  systematic  further  ap- 
praisals, and  the  insurance  premium  was  assessed  on  a 
fixed  portion  of  the  value  thus  determined. 

Whatever  may  have  been  the  psychological  occasion 
therefore,  the  fact  remains  that  Wisconsin,  an  agricul- 
tural community  In  the  early  '70's,  was  bitterly  hostile  to 
fire  insurance  companies  and  was  seeking  a  means  to  com- 
pel the  companies  to  pay  the  full  value  of  property 
insured. 

Mr.  A.  F.  Dean  says,  that  a  few  irresponsible  com- 
panies were  the  means  of  most  of  the  troubles  of  this 
period;  that  these  companies,  with  policies  which  prom- 
ised the  assured  everything  on  conditions  which  the  as- 
sured could  not  fulfil,  and  relieved  themselves  of  liability 
by  concealed  and  artfully  phrased  conditions,  sent  ped- 
lers  broadcast  throughout  the  State,  selling  everything 
from  clothes  wringers  to  lightning-rods,  with  their  pol- 

[276] 


APPENDIX  V 


icies  as  a  side  line.  That  these  agents  being  paid  on  a 
commission  basis  eagerly  filled  in  the  policies  for  the 
largest  amounts  possible,  encouraging  the  farmers  to  be- 
lieve that  the  companies  delighted  to  pay  any  sum  that 
they  wished  to  carry.  Then  when  losses  came  the  com- 
panies quickly  revealed  the  saving  clauses  in  their  pol- 
icies and  through  shrewd  adjusters  scaled  down  their  loss 
payments  to  suit  themselves.  The  whole  business  of  fire 
insurance,  says  Mr.  Dean,  was  brought  into  disrepute 
by  these  few  companies  with  their  pedler  agents.  As  a 
result  a  law  was  passed  which  provided  that  in  the  case 
of  the  total  destruction  of  the  building  by  fire,  there  being 
no  proof  of  crime,  the  amount  stated  in  the  face  of  the 
policy  should  be  paid  to  the  assured. 

The  law  was  brought  into  the  Supreme  Court  of  the 
State  for  testing  and  its  validity  sustained.  Judge  Cole, 
in  the  case  of  Riley  versus  Franklin  Insurance  Company, 
says  of  this  law  that  its  purpose  was  "to  prevent  over- 
insurance  and  to  guard  as  far  as  possible  against  care- 
lessness and  every  inducement  to  destroy  the  property  in 
order  to  procure  the  insurance  upon  it.  When  property 
is  insured  above  its  value  a  strong  temptation  is  presented 
.  .  .  either  to  intentionally  burn  it  or  not  to  guard  and 
protect  it  as  one  ought."  Certainly  a  very  curious  illus- 
tration of  how  men  may  differ  as  to  the  true  import  of 
the  laws  which  they  enact. 

Insurance  company  officials,  many  of  the  State  Execu- 
tives and  the  heads  of  many  State  Insurance  Depart- 
ments, have  agreed  in  asserting  that,  far  from  discourag- 
ing the  things  aimed  at,  valued  policy  laws  are  themselves 
a  prolific  source  of  precisely  these  evils. 

It  is  interesting  to  note  that  the  Wisconsin  law  enacted 
In  1874  was  repealed  in  19 15  and  that  the  law  which  may 

[277] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

be  said  to  replace  it  on  the  Wisconsin  Statutes  forbids 
insuring  for,  or  paying  losses  in  excess  of,  the  cash  value 
of  property. 

The  State  of  Wisconsin  having  passed  the  valued  pol- 
icy law  others  followed  rapidly. 

While  Insurance  Commissioners  have  nearly  always 
opposed  valued  policy  laws,  State  Legislatures  have  re- 
garded them  with  considerable  favor.  Rough  Notes,  an 
insurance  journal  published  in  Indianapolis,  says  that 
between  the  years  1891  and  1900,  inclusive,  one  hundred 
and  sixty-eight  valued  policy  laws  were  introduced  into 
the  legislatures  of  the  several  states;  only  eleven,  how- 
ever, were  passed. 

In  19 1 5  valued  policy  laws  are  in  force  in  the  follow- 
ing twenty-two  states: 

Arkansas  (1889)  Colorado  (i 901)  Delaware  (1889) 

Florida  ( 1897)  Georgia  (1895)  Iowa  (1897) 

Kansas  (1893)  Kentucky  (1893)  Louisiana  (1900) 

Minnesota  (1905)  Mississippi  ( 1902)  Missouri  (1889) 

N.Hampshire  (1885)  N.  Dakota  (i907)Ohio  (1879) 

Oregon  ( 1893)  So.  Carolina  (1896)  So.  Dakota  (1903) 

Tennessee  (1909)  Texas  (1879)  Washington  (1897) 

W.Virginia  (1899) 

Besides  out  and  out  valued  policy  laws  in  twenty-two 
States,  Idaho,  Massachusetts,  and  the  outlying  posses- 
sion of  Hawaii  have  laws  which  provide  that,  in  case  the 
assured  has  paid  premiums  on  an  amount  in  excess  of  the 
value  of  the  property  insured,  as  shown  by  the  loss  adjust- 
ment, he  shall  under  certain  conditions  receive  back  from 
the  company  the  difference  between  the  premium  that  he 
would  have  paid  for  the  lesser  amount  and  the  premium 
that  he  actually  paid  for  the  greater  amount. 

These   valued   policy   requirements    apply   usually   to 

[278] 


APPENDIX  V 


buildings  only.  While  the  tendency  to  enact  valued  pol- 
icy laws  seems  to  be  waning,  the  tendency  of  certain  leg- 
islators to  introduce  valued  policy  bills  can  hardly  be 
said  to  have  lessened.  In  19 15,  valued  policy  bills  were 
introduced  in  the  legislatures  of  Indiana,  Massachusetts, 
Montana,  Nebraska,  New  Mexico,  Oklahoma  and  Ten- 
nessee, although  none  of  them  became  laws. 

In  1885,  after  eleven  years  of  valued  policy  experience, 
principally  with  rural  states  of  the  middle  west  and  south, 
the  Convention  of  State  Insurance  Commissioners,  met 
in  Chicago,  and  passed  this  resolution: 

Resolved,  That  insurance  is  indemnity;  and  over-insurance 
which  enables  the  owner  of  property  to  recover  more  than  its 
value,  is  an  inducement  to  crime.  It  is,  therefore,  the  sense  of 
this  Convention  that  laws  which  compel  the  payment  of  the  full 
amount  written  in  the  contract  of  fire  insurance,  though  the  actual 
loss  be  shown  to  be  less,  are  repugnant  to  just  insurance  principles 
and  enlightened  public  policy. 

In  1887,  the  Superintendent  of  Insurance  of  the  State 
of  Ohio  urged  in  his  annual  report  the  repeal  of  the 
valued  policy  act  passed  by  that  State  in  1880.  "I  at- 
tribute," he  says,  "the  great  increase  in  the  ratio  of  loss 
in  the  State  of  Ohio,  during  the  last  six  years,  to  incen- 
diarism, fostered  by  the  Howland  law"  (V.  P.  Law). 
In  1878  the  Wisconsin  Insurance  Commissioner,  urged 
the  repeal  of  the  Wisconsin  valued  policy  law,  saying  that 
"Incendiarism  is  rapidly  increasing  and  alarmingly  prev- 
alent with  over-insurance  as  its  chief  cause."  Then, 
having  in  mind  the  fact  that  it  was  to  prevent  the  same 
over-Insurance  that  the  Wisconsin  law  was  passed,  he 
says:  "What  Is  the  remedy?  Is  it  found  in  the  law 
referred  to?  From  a  careful  consideration  it  seems  to 
me  not.  .  .  ." 

[279] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

In  1879,  the  Wisconsin  Commissioner  says,  that  from 
the  best  obtainable  Information,  "one-third  of  the  losses 
In  this  State  during  the  past  year  were  through  incendiary 
fires."  And  while  not  all  were  attributable  to  the  Wis- 
consin law,  he  believed  that  all  had  been  largely  encour- 
aged by  It.  The  incendiary  losses  for  the  year  he  be- 
lieved exceeded  $330,000,  or  a  burden  equal  to  nearly 
one-half  of  the  state  tax. 

Finally,  in  1880,  the  Wisconsin  commissioner  says: 
"While  this  law  doubtless  originated  through  a  desire  to 
repress  over-insurance  and  with  It  incendiarism  a  careful 
study  of  the  statistics  in  Wisconsin  quite  convinced  him 
that  although  it  may  have  lessened  to  some  extent  over- 
Insurance,  it  had  largely  increased  incendiarism" ;  afford- 
ing not  only  an  ever  present  opportunity  to  the  dishonest 
but  a  constant  temptation  even  to  the  honest  man  under 
stress  of  circumstances. 

The  New  Hampshire  commissioner,  in  1881,  combat- 
ing the  proposal  to  enact  a  valued  policy  law  In  New 
Hampshire,  says:  "The  valued  policy  remedy  only  invites 
and  facilitates  the  commission  of  crime,  while  it  rewards 
the  criminal  .  .  .  the  most  adroit  rogues  themselves 
could  not  devise  a  more  efficient  scheme  to  facilitate  the 
burning  of  property  and  the  enriching  of  participants  in 
the  crime."  In  similar  vein,  and  on  various  occasions 
covering  a  long  period  of  years,  we  find  the  supervising 
Insurance  officials  of  New  York  State,  of  Massachusetts, 
of  Pennsylvania,  of  Michigan,  of  Minnesota,  of  Kansas; 
and  the  several  supervising  officials  In  National  Conven- 
tion Assembled,  protesting  against  such  legislation  as  un- 
sound in  principle,  vexatious  In  practise,  and  subversive 
of  the  fundamental  principles  of  fire  insurance  itself.  So 
too  we  find,  with  wealth  and  ingenuity  of  argument,  Gov- 

[280] 


APPENDIX  V 


ernors  of  the  States  of  Pennsylvania,  Illinois,  Colorado, 
Utah,  West  Virginia,  Iowa,  California,  and  Wisconsin 
voicing  the  same  protestations. 

Indeed  it  would  be  difficult  to  select  any  piece  of  legis- 
lation where  the  voice  of  all  in  a  position  to  form  an  intel- 
ligent opinion  whether  representative  of  insurers  or 
insured,  had  been  so  unanimously,  and  so  continuously 
raised  in  protest.  And  why  it  has  persisted  through  so 
many  years,  has  appeared  and  re-appeared  in  so  many 
forms  and  so  many  localities,  is  one  of  the  mysteries 
which  the  student  of  popular  government  will  probably 
seek  to  solve  for  a  long  time  to  come. 

The  few  apologists  for  standard  policy  laws  claim  for 
them  these  results: 

That  they  induce  caution  on  the  part  of  underwriters, 
causing  them  carefully  to  adjust  insurance  to  value;  that 
they  tend  to  a  stricter  supervision  on  the  part  of  under- 
writers and  consequently  to  a  reduced  fire  hazard,  includ- 
ing moral  hazard;  that  they  tend  to  lessen  over-insurance 
due  to  the  habits  of  caution  on  the  part  of  the  insurer, 
referred  to  above;  and,  finally,  that  they  work  a  larger 
measure  of  justice  to  the  assured,  by  making  it  less  easy 
to  collect  from  him  premiums  based  on  an  amount  largely 
in  excess  of  the  adjustable  value  of  his  property. 

On  the  other  hand,  opponents  of  valued  policy  legis- 
lation claim  that,  instead  of  discouraging  over-insurance, 
in  practise  it  really  encourages  over-insurance,  it  being 
impossible  in  many  cases,  especially  on  low-valued  prop- 
erty, to  make  the  kind  of  exact  appraisal  necessary  to 
determine  its  value,  even  at  the  time  the  insurance  is 
written. 

Secondly,  that,  because  it  does  not  discourage,  but 
rather  encourages  over-insurance,  it  is  a  direct  incentive 

[281] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

to  the  crime  of  arson  and  indirectly  tempts  even  honest 
persons  in  times  of  financial  stress  to  burn  or  neglect  to 
care  for  their  property.  Thirdly,  that  it  tends  auto- 
matically to  reduce  the  amount  of  insurance  to  value  that 
the  insurer  will  carry  and  hence  to  deprive  honest  men  of 
the  full  coverage  to  which  they  are  entitled.  Finally, 
that,  since  the  loss  cost  sooner  or  later  makes  itself  felt 
and  gets  into  the  rate,  it  ultimately  leads  to  increase  of 
fire  insurance  rates,  casting  a  burden  upon  all  honest  peo- 
ple to  carry  the  excessive  losses  for  a  few  dishonest 
people. 

Many  attempts  have  been  made  to  show  by  compara- 
tive statistics  the  effects  of  valued  policy  legislation  on 
the  fire  waste.  I  have  been  unable  to  discover  any  such 
uniformity  in  results  as  shown  by  comparative  statistics, 
as  would  warrant  sweeping  conclusions.  Common  sense 
would  seem  to  indicate  a  higher  loss  ratio  where  valued 
policy  laws  prevail,  but  the  actual  statistics  seem  to  show 
sometimes  a  higher  loss  ratio  and  sometimes  no  notable 
change.  It  is  probable  that  many  other  factors  enter 
into  the  problem  and,  before  a  fair  comparison  can  be 
made,  these  factors  must  be  recognized.  The  fact  that 
valued  policy  laws  generally  apply  only  to  buildings  and 
not  to  contents  produces  another  factor  diflicult  of 
handling. 

In  conclusion,  it  is  interesting  to  note  that  in  a  report 
made  by  an  Australian  Government  fire  insurance  investi- 
gating commission  the  principle  of  valued  policy  legis- 
lation after  being  thoroughly  discussed  is  decided  to  be 
wrong  and  perversive  of  the  ends  of  fire  insurance  as 
well  as  of  the  good  of  the  community. 


[282] 


APPENDIX  VI 
ANTI-COMPACT  LAWS 

It  is  apparent  that  fire  insurance  company  officials, 
from  a  very  early  period,  have  appreciated  the  neces- 
sity of  determining  and  maintaining  rates  at  a  point  which 
would  cover  the  cost  of  the  business  plus  a  reasonable 
margin  for  profit  on  money  invested. 

It  is  apparent,  too,  that  they  have  realized  that  a  rate 
which  measured  this  cost  as  accurately  as  possible,  allow- 
ing a  moderate  profit,  was  not  only  the  most  defensible 
rate  but  the  most  profitable  rate  for  the  companies.  It 
seems  quite  evident  that  insurance  company  officials  early 
appreciated  the  dangers  which  would  arise  among  the 
companies  themselves  as  soon  as  rates  became  either 
excessive  or  inadequate.  It  was  seen  that  excessive  rates 
invited  the  organization  of  new  companies,  with  extraor- 
dinary temptations  to  cut  the  rate  or  to  over-pay  for  the 
sake  of  getting  the  business,  while  inadequate  rates  inevi- 
tably led  to  depleted  reserves,  diminished  capital  and 
eventual  bankruptcy. 

In  1806,  we  find  Bache  Bros.,  representing  the  Phoenix 
Fire  Office  of  London  in  New  York,  and  the  officials  of 
the  Eagle  Fire  Insurance  Company,  of  New  York,  con- 
ferring for  "promoting  harmonious  intercourse  between 
the  two  companies  and  agreeing  to  a  uniformity  of 
rates";  and  in  the  same  year  we  find  the  Eagle  Fire  In- 
surance Company  of  New  York  considering  the  report 
of  a  special  committee  appointed  to  consider  and  report 
on  "the  premiums  that  should  be  estabhshed  on  extra- 

[283] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

hazardous  risks,"  and  directing  this  special  committee  in 
conference  with  the  president  to  make  rates  in  all  special 
cases. 

About  the  same  time,  we  find  the  Insurance  Company 
of  North  America  complaining  that  the  Philadelphia  rep- 
resentative of  the  Phoenix  Fire  Office,  of  London,  is  cut- 
ting the  rate,  but  at  the  same  time  congratulating  itself 
that  the  public  of  Philadelphia  Is  so  discriminating  that 
it  willingly  pays  the  higher  rate  of  the  Insurance  Com- 
pany of  North  America  for  the  greater  security  thereby 
conferred. 

The  "Salamander  Society"  in  New  York  City,  organ- 
ized in  1 8 19,  and  its  successor  the  "Association  of  Fire 
Insurance  Companies,"  organized  in  1829,  as  well  as  its 
successors,  all  grew  out  of  a  recognition  on  the  part  of 
early  fire  Insurance  officials  of  the  necessity  of  making 
rates  that  were  adequate  and,  having  made  them,  of 
maintaining  them. 

But,  while  there  seems  to  have  been  this  early  appre- 
ciation of  the  necessity  of  making  adequate  rates  and  of 
maintaining  them,  and  this  realization  of  the  fact  that 
the  only  way  to  do  this  was  by  cooperation  among  insur- 
ance companies,  there  does  not  seem  to  have  been  at  any 
time  an  agreement  on  the  part  of  all  fire  Insurance  com- 
panies concerned,  either  to  cooperate  to  make  the  rates  or 
to  maintain  them  when  they  had  been  made.  The  result 
of  this  Is  shown  In  the  early  history  of  fire  Insurance 
Itself. 

In  a  report  made  by  a  committee  of  companies  held  In 
New  York  City  In  May,  1850,  It  Is  stated  that  the  busi- 
ness of  Insurance  against  fire  In  the  United  States,  from 
Its  commencement  In  18 10,  was  profitable;  that  such  was 
the  uniformity  of  rates  of  premium  and  the  judicious 

[284] 


APPENDIX  VI 


management  of  companies  that  the  premiums  were  suffi- 
cient to  meet  the  ordinary  losses  and  to  enable  the  com- 
panies to  lay  by  considerable  sums  as  surplus;  that  the 
practise  of  reducing  the  rates  of  premiums  in  order  to 
obtain  risks  that  were  insured  by  other  companies  had 
not  then  been  adopted;  that  the  surplus  accumulated  dur- 
ing this  period  by  the  companies  in  New  York  City  ex- 
ceeded a  million  dollars. 

The  report  goes  on  to  say  that,  during  the  twenty 
years  that  followed  1810,  many  new  companies  were 
established  with  cash  capital  of  frorn  two  hundred  to 
three  hundred  thousand  dollars.  Fierce  competition  en- 
sued between  the  new  companies  and  the  old,  with  the 
new  companies  adopting  extremest  methods  to  get  the 
business;  rate  cutting  compelled  the  old  companies  to 
resort  to  the  same  methods  in  order  to  retain  the  busi- 
ness which  they  had  built  up  through  many  years  of  care- 
ful underwriting. 

Eventually,  rates  were  brought  so  low  that  they  were 
insufficient  to  pay  ordinary  losses  while  nothing  was  laid 
by  to  meet  extraordinary  losses.  The  old  companies 
managed  to  pay  their  dividends  by  applying  the  interest 
on  capital  and  when  necessary  as  much  of  the  surplus  as 
would  make,  with  the  interest,  the  amount  of  the  dividend. 

During  this  period,  the  surplus  of  the  old  New  York 
companies  is  said  to  have  been  greatly  diminished.  The 
report  declares  that  in  the  period  of  twenty  years,  from 
181 1  to  1830,  inclusive,  fire  insurance  business  in  the 
United  States  did  not  produce  an  average  profit  of  3  per 
cent,  per  annum  on  capital  employed;  while  during  the 
twenty  years,  from  1831  to  1850,  inclusive,  with  a  con- 
stantly increasing  competition  and  a  steadily  declining  rate, 
the  whole  premiums  received  in  the  United  States  and  Can- 

[285] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

ada,  although  supplemented  by  millions  drawn  out  of  the 
capital  stock,  had  hardly  sufficed  to  meet  the  losses. 
Stock  company  and  mutual  company  failures  were  fre- 
quent. The  report  also  declared  that  for  the  period  of 
sixty  years,  from  1791  to  1850,  there  had  not  only  been 
no  profit  but  an  actual  very  large  loss  of  capital. 

As  a  result  of  the  report  made  at  this  time,  many  of 
the  leading  companies  a,greed  to  cooperate  in  fixing  rates 
of  premiums  and  in  abiding  by  them.  About  the  same 
time  there  was  organized  In  Philadelphia  the  Philadel- 
phia Board  of  Underwriters,  whose  purpose  was  to  make 
and  maintain  rates  for  that  city. 

While  the  companies  were  gradually  being  driven  by 
necessity  to  cooperate  in  making  and  maintaining  rates, 
many  companies  still  remained  aloof.  New  companies 
were  constantly  organized  and  the  competitive  strife 
went  on. 

The  insuring  public  meanwhile  having  become  accus- 
tomed to  competltve  rates  and  the  playing  of  companies, 
one  against  the  other,  completely  lost  sight  of  the  fact, 
If  it  ever  clearly  saw  It,  that  fire  Insurance  rates  must 
be  sufficient  to  pay  losses,  the  expense  of  transacting 
the  business,  and  a  fair  return  on  money  invested.  Lit- 
tle by  little,  apparently,  there  had  grown  up  a  feeling 
that  attempts  on  the  part  of  fire  Insurance  companies  to 
cooperate  for  the  making  and  maintaining  of  rates,  were 
monopoHstIc  in  character.  In  the  report  of  company 
officials  just  referred  to  above,  this  paragraph  occurs : 

Some  of  those  who  only  look  at  the  surface  of  things  may  say 
that  our  consultation  together  to  avert  impending  ruin,  is  a  com- 
bination to  establish  a  monopoly.  They  do  not  perceive  that 
there  cannot  be  a  monopoly,  when  there  is  no  obstacle  in  the  way 
of  competition — that  exorbitant  premiums  would  defeat  the  object, 
by  raising  up  such  competition. 

[286] 


APPENDIX  VI 


Rates  of  premiums  that  are  sufficient  to  meet  the  aggregate 
amount  of  losses  can  only  be  ascertained  by  the  experience  of  many 
years, — not  the  experience  of  one  company  but  of  all  the  Com- 
panies. There  is  no  other  safe  guide  for  the  transaction  of  this 
business.  It  is  therefore  of  much  importance  to  have  this  infor- 
mation from  as  many  sources  as  are  accessible. 

And  in  July,  1852,  following  the  organization  of  the 
Philadelphia  Board  of  Underwriters  with  its  prompt  ad- 
vancement of  rates  in  Philadelphia,  Tiickett's  Monthly 
Insurance  Journal  says: 

An  absurd  idea  has  been  adopted  by  some  parties  that  a  fixing 
of  a  tariff  by  a  Board  of  Underwriters  is  a  monopoly,  whereas 
it  is  in  reality  an  Association  for  statistical  purposes,  and  correct 
statistics  correct  many  odd  notions. 

Here  in  the  beginning  and  middle  of  the  19th  cen- 
tury we  clearly  see  circumstances  compelling  fire  insur- 
ance companies  to  cooperate  in  rate  making,  and  the  insur- 
ing public,  which  has  for  long  been  led  to  look  upon 
premium  rates  as  solely  a  matter  of  competitive  bargain- 
ing, protesting  against  the  methods  by  which  the  insur- 
ance companies  seek  to  save  themselves  from  disaster. 

At  this  point  it  is  interesting  to  reflect  on  what  might 
have  happened,  if  the  companies  at  this  time  had  pos- 
sessed any  standard  by  which  fire  hazards  could  have 
been  measured,  or  any  sufficient  data  through  which  such 
standards  might  have  been  constructed.  It  is  possible 
that  the  companies,  had  they  known  approximately  the 
cost  of  carrying  the  various  classes  of  risks  which  they 
were  called  upon  to  insure,  might  have  completely  fore- 
stalled all  the  hostile  legislation  that  was  to  follow. 
For  had  the  companies  known  the  cost  of  carrying  the 
several  classifications  involved,  would  it  not  have  been 
easy   to   demonstrate   the   necessity   for   cooperation   to 

[287] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

secure  the  statistics  upon  which  such  knowledge  was 
based?  Moreover,  had  the  companies  themselves 
known  what  it  would  probably  cost  them  to  carry  cer- 
tain classes  of  risks,  must  the  tendency  not  have  been  for 
the  rate  to  reach  a  point  where  only  a  fair  profit  would 
follow;  where  rate-cutting  would  be  impossible  and 
where  excessive  commissions  would  be  out  of  the 
question  ? 

And  is  it  not  conceivable  that  with  a  known  basis  upon 
which  to  estimate  costs,  the  public  would  have  rested 
content  or  at  least  would  have  sought  by  other  means 
to  exact  a  justice  which  it  felt  was  being  denied? 

However  these  things  may  be,  it  is  apparent  that  the 
only  means  available  to  the  companies  for  averting  their 
own  destruction  was,  to  the  public  at  large,  the  occasion 
of  increasing  suspicion  and  hostility. 

In  the  period  from  1850  to  i860,  rate  demoraliza- 
tions continued  with  company  efforts  to  correct  them 
resulting  in  rating  organizations  in  a  few  of  the  large 
cities,  such  as  New  York,  Philadelphia  and  Chicago,  and 
in  the  '6o's,  following  the  organization  of  the  National 
Board,  an  attempt  was  made  throughout  the  country  to 
establish  rate-making  on  a  permanent  basis  of  uni- 
formity. 

In  the  early  and  middle  '8o's,  in  line  with  the  same 
efforts,  were  organized  those  large  regional  organiza- 
tions, examples  of  which  are  found  in  the  "Union," 
"New  England  Insurance  Exchange,"  "Underwriters 
Association  of  the  Middle  Department,"  "South  Eastern 
Underwriters  Association,"  etc. 

The  hostility  on  the  part  of  the  public,  which  has  al- 
ready been  noted,  broke  finally  into  what  is  now  known 
as   anti-compact  legislation,   legislation  which   seeks,    on 

[288] 


APPENDIX  VI 


the  ground  that  insurance  company  cooperation  is  mo- 
nopolistic in  character,  to  prevent  cooperative  action  of 
every  kind. 

The  first  anti-compact  law  was  passed  in  Ohio  in  1885. 
Two  years  earlier,  a  similar  law  had  been  introduced 
into  the  legislature  of  Michigan  at  the  instigation,  it  is 
claimed,  of  large  furniture  manufacturers  in  Grand 
Rapids,  who  opposed  rate  advances  made  by  local  boards 
of  underwriters.  The  bill  failed  at  that  time  in  Mich- 
igan, but  in  1887  was  enacted,  passing  both  houses  of 
the  legislature  by  a  large  majority.  The  insurance  com- 
panies immediately  protested,  declaring  that  the  law  was 
unconstitutional. 

Meanwhile,  David  Beveridge  established  at  Detroit 
an  individual  inspection  and  rating  bureau  and  through  a 
prospectus  sent  to  the  companies  invited  them  to  become 
members.  In  the  opening  paragraph  of  his  prospectus 
Mr.  Beveridge  says:  "That  the  law  forbidding  agree- 
ments between  fire  insurance  companies,  seems  to  render 
necessary  a  different  plan  of  conducting  business." 

Mr.  Beveridge  assumed  that  the  expense,  which  would 
be  necessary  to  enable  each  company  to  rate  and  inspect 
risks  independently,  would  not  only  be  prohibitive  but 
would  result  in  a  situation  which  would  mean  that  no 
property  owner  could  tell  from  day  to  day  what  his 
rate  of  insurance  would  be.  Consequently,  he  proposed 
to  establish  a  private  bureau,  establishing  branches 
throughout  the  State  in  charge  of  competent  deputy  in- 
spectors, having  underwriting  knowledge  and  skill,  whose 
duty  would  be  to  examine  all  classes  of  risks  to  see  that 
proper  regulations  for  the  prevention  of  fires  were  en- 
forced in  mills,  lumber  yards,  manufactories,  theaters, 
etc.;  to  prepare  forms  of  policies  for  different  classes  of 

[289] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

risks;  to  inspect  and  rate  risl^s;  to  furnish  the  rates  so 
fixed  to  subscribers  and  agents ;  and  to  perform  such  other 
duties,  not  contrary  to  law,  as  the  instances  of  its  sub- 
scribers might  require.  In  other  words,  to  do  as  a 
private  citizen  what  the  companies  heretofore  had  done 
in  association.  Mr.  Beveridge  stated  that  he  proposed  to 
make  the  rates  as  low  as  the  subscribing  companies  could 
safely  accept  with  a  moderate  charge  to  profit,  and  he 
reserved  the  right  to  adopt  existing  tariffs  as  the  rates  of 
his  bureau  until  they  were  changed  and  the  changes  were 
duly  promulgated.  In  his  prospectus  he  outlined  the 
method  by  which  the  bureau  was  to  work;  divided  the 
State  into  five  districts,  and  called  upon  the  companies  to 
agree  to  regard  the  rates  as  confidential,  and,  having 
received  them,  to  abide  by  them. 

The  attorney  general  at  the  instance  of  the  insurance 
commissioner,  prepared  a  lengthy  opinion  under  date  of 
February  ii,  1888,  in  which  he  decided  that  the  inde- 
pendent inspection  bureau  as  outlined  by  Mr.  Beveridge 
was  not  permissible  under  the  Anti-Trust  Law  of  1887, 
and  that  agents  who  sent  their  policies  to  the  deputies 
provided  for  by  Mr.  Beveridge's  plan,  as  directed  by 
their  companies,  would  be  likewise  violating  the  law. 

Shortly  afterwards,  the  Supreme  Court  in  Michigan, 
to  whom  the  matter  had  been  brought  for  adjudication, 
decided  that  the  anti-compact  law  was  constitutional. 
From  this  time  on  anti-compact  laws  In  one  form  or 
another  were  rapidly  enacted. 

In  1889,  Nebraska  and  Texas  enacted  similar  laws. 
Nebraska's  law  was  declared  unconstitutional  two  years 
later.  Bills  were  introduced  into  no  less  than  fifteen 
States,   in   1897,   and  three  of  them  became  laws.     In 

[290] 


APPENDIX  VI 


1899,  bills  were  introduced  in  fourteen  States,  five  of 
them  becoming  laws.  In  1897,  a  bill  was  introduced 
into  Connecticut  which  was  then  second  of  the  New  Eng- 
land States  to  show  an  interest  in  this  type  of  legislation. 

From  1883  to  1893,  anti-compact  laws  were  intro- 
duced into  New  Hampshire,  Ohio,  Michigan,  Kansas, 
Missouri,  Nebraska,  Texas,  Georgia,  Maine  and  Missis- 
sippi. Maine  was  the  first  of  the  New  England  States, 
after  New  Hampshire,  to  pass  anti-compact  legislation. 
Both,  Maine  and  New  Hampshire  had  been  under  the 
jurisdiction  of  the  New  England  Insurance  Exchange. 
With  the  passing  of  this  law,  exchange  jurisdiction  in 
these  states  ceased.  In  New  Hampshire,  the  New 
Hampshire  Board  of  Fire  Underwriters  was  organized 
and  maintained  by  state  companies  and  proceeded  to  do 
the  work  which  the  exchange  had  formerly  done.  In 
Maine,  an  independent  rating  bureau  was  established. 
New  Hampshire's  law  continues  on  the  statute  books 
until  the  present  day,  but  Maine's  was  repealed  after  two 
years'  experience,  and  the  New  England  Exchange  re- 
sumed its  jurisdiction  over  that  State  in  1895. 

The  years  1899  and  1900  marked  the  high-water  mark 
of  anti-compact  legislation;  in  these  two  years  five  states 
enacted  anti-compact  laws,  while  bills  were  introduced 
into  twelve  other  states,  but  failed  of  passage. 

The  period  from  1903  to  1909,  inclusive,  was  prolific 
of  anti-compact  bills,  no  less  than  fifty-seven  being  intro- 
duced into  various  states,  but  resulted  in  comparatively 
few  additions  to  the  states  having  anti-compact  laws.  In 
this  period  only  four  anti-compact  laws  were  passed. 
The  following  list  shows  roughly,  by  years,  laws  passed 
(L)  and  Bills  introduced  (B)  : 

[291] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 


ANTI-COMPACT    LAWS 


(L) 

(B) 

(L) 

(B) 

1883 

. 

I 

1900 

I 

2 

1885 

2 

I 

1901 

0 

5 

1887 

I 

. . 

1902 

0 

2 

1888-9 

I 

. . 

1903 

I 

II 

1890-2 

I 

1904 

0 

3 

1893 

I 

I 

1905 

2 

10 

1894 

0 

3 

1906 

0 

5 

1895 

I 

5 

1907 

I 

10 

1896 

0 

I 

1908 

0 

8 

1897 

3 

9 

1909 

0 

10 

1898 

I 

. . 

1910 

0 

4 

1899 

4 

10 

1911 

*2 

6 

*  Insurance 

Code. 

The  Maine  anti-compact  law  was  repealed  in  1895. 
In  1900,  three  bills  to  repeal  anti-compact  laws  were  intro- 
duced. In  1 90 1,  one  bill  to  repeal  existing  anti-compact 
laws  was  introduced,  and,  in  1902,  two  bills  were  intro- 
duced to  repeal  existing  laws. 

The  insurance  commissioners  were  beginning  to  doubt 
the  efficacy  of  this  type  of  legislation.  All  anti-compact 
laws  had  proceeded  on  the  assumption  that  the  associa- 
tion of  fire  insurance  companies,  for  the  purpose  of  mak- 
ing and  maintaining  rates,  was  essentially  monopolistic 
in  character,  and  that  the  evils  growing  out  of  such  mo- 
nopolistic control  would  be  done  away  with  if  the  mo- 
nopoly itself  could  be  destroyed.  Now,  however,  began 
to  appear  a  feeling,  voiced  by  certain  state  commissioners, 
that  cooperation  of  fire  insurance  companies  to  make  and 
maintain  rates  was  absolutely  necessary  if  the  solvency 
of  companies  were  to  be  secured,  discrimination  in  rates 
to  be  avoided,  and  uniformity  in  rates  to  be  effected. 
Consequently,  about  this  time,  there  appeared  bills  that 

[292] 


APPENDIX  VI 


either  admitted  or  specifically  authorized  the  association 
of  companies  to  make  rates  but  required  that  this  func- 
tion be  performed  under  close  state  supervision.  Before 
this  point  was  reached  an  intense  struggle  had  gone  on 
between  the  state  legislatures  on  the  one  hand,  and  the 
insurance  companies  on  the  other;  each  appealing  to  the 
state  and  federal  courts. 

In  Missouri,  the  secretary  of  state  attempted  to  en- 
force the  anti-compact  law  against  the  fire  insurance  com- 
panies in  1893  but  was  resisted  by  the  companies.  The 
attorney  general  finally  ruled  against  the  insurance  offi- 
cial, restraining  him  from  further  activities.  In  1895, 
the  law  in  Missouri  was  amended,  this  time  making  it 
apply  explicitly  to  combinations  of  fire  insurance  under- 
writers but  exempting  cities  of  over  100,000  inhabitants, 
which  included  St.  Louis  and  Kansas  City,  the  centers  of 
most  active  opposition  to  the  law.  This  law  was  very 
drastic  and  manifestly  grew  out  of  hostility  to  the  com- 
panies. In  1898,  the  attorney  general  of  Missouri  be- 
gan suits  against  the  insurance  companies  in  combination 
in  the  exempted  cities  of  Kansas  City  and  St.  Louis 
claiming  that  the  exemption  was  unconstitutional.  The 
Missouri  Supreme  Court  sustained  the  claim  of  the  com- 
panies and  denied  the  claim  of  the  attorney  general 
that  the  exemption  of  cities  of  over  one  hundred  thou- 
sand population  from  the  operation  of  the  anti-trust  law 
was  unconstitutional. 

In  1901,  after  several  years  of  unceasing  agitation,  a 
more  sweeping  anti-trust  law  was  enacted  in  Missouri, 
which  did  away  with  the  exemption  granted  to  combina- 
tions of  fire  underwriters  in  cities  of  over  one  hundred 
thousand  inhabitants,  making  necessary  the  dissolution  of 
the  underwriting  boards  in  Kansas  City  and  St.  Louis. 

[293] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Shortly  after  this,  W.  J.  Fetter  established  the  Kansas 
City  Independent  Actuarial  or  Rating  Bureau,  where  he 
prepared  and  published  books  of  advisory  rates  on  fire 
insurance  of  cities  and  towns  in  Missouri,  which  were 
used  by  representatives  of  companies  forming  the  "Un- 
derwriters Social  Club  of  St.  Joseph,  Mo."  The  at- 
torney general  brought  suit  against  over  seventy  com- 
panies, members  of  this  club,  charging  violation  of  the 
anti-trust  law  and  asking  the  Supreme  Court  of  the  state 
for  a  writ  of  ouster  to  compel  their  dissolving  the  club 
and  to  prohibit  them  from  doing  further  business  in 
the  state  until  they  should  do  so. 

The  Court  complied  with  the  request  and,  In  its 
opinion,  said: 

The  Underwriters  Social  Club  is  a  pool,  trust  and  conspiracy 
organized  and  maintained  by  the  defendant  companies  and  is 
therefore  an  unlawful  combination  and  subject  to  the  penalties 
prescribed  in  the  Act  of  1897  .  .  .  the  judgment  of  the  Court  is 
that  the  defendants  be  Ousted  of  rights,  privileges  and  franchises 
conferred  by  the  Laws  of  this  State  .  .  .  and  that  they  pay  the 
costs  of  this  proceeding. 

Judge  Valliant  dissented  from  the  opinion  of  his  fel- 
low judges  on  the  ground  that  the  chief  testimony  In 
support  of  the  charge  of  conspiracy  was  given  by  two 
former  members  of  the  Underwriters  Social  Club  who 
were  unfriendly  to  the  club  because  of  differences  of 
opinion  which  had  led  to  their  withdrawal.  Regarding 
Fetters'  Rate  Book,  Judge  Valliant  said: 

There  is  nothing  unlawful  in  the  character  of  the  book  and 
nothing  unlawful  in  the  insurance  companies  basing  their  business 
ventures  on  the  information  it  contains  .  .  .  the  use  that  a  fire 
insurance  company  standing  alone  may  see  fit  to  make  of  the  book 
is  no  more  to  be  condemned  than  the  use  that  a  merchant  may 
make  of  the  daily  price  current  reports. 

[294] 


APPENDIX  VI 


The  Writ  issued  by  the  Court  was  to  take  effect  July 
lO,  1899,  but  the  companies  having  argued  unsuccessfully 
for  a  re-hearing  of  the  case  and  their  counsel  having 
asked  thereupon  for  a  modification  of  the  judgment 
against  the  companies,  the  Court  modified  the  judgment 
by  changing  it  from  an  absolute  ouster  to  a  fine  of  one 
thousand  dollars  for  each  company,  and  their  promise  to 
hereafter  abide  by  the  anti-trust  law  as  construed  by  the 
court. 

Early  in  1900,  nearly  one  hundred  fire  insurance  com- 
panies paid  to  the  State  of  Missouri  fines  of  one  thousand 
dollars  each  and  were  reinstated  in  the  business  of  the 
State. 

By  this  time,  conditions  in  Missouri  had  become  so 
demoralized  that  local  agents  were  actively  engaged  in 
legislative  work  and  actually  drafted  and  introduced  into 
the  Missouri  legislature  several  bills,  the  more  important 
of  which  provided  that  local  agents  might  organize  inde- 
pendent of  the  fire  insurance  companies  to  make  fire  in- 
surance rates  in  the  State  of  Missouri.  These  bills  were 
not  enacted. 

The  disturbed  conditions  in  the  State  of  Missouri 
within  the  last  few  years  are  well  known. 

In  Arkansas,  in  1899,  an  anti-compact  law  was  passed 
which  forbade  companies,  which  were  a  party  to  any 
combinations  of  companies  to  fix  and  maintain  rates 
wherever  organized,  to  do  business  in  the  State  of  Ar- 
kansas. This  Introduced  the  question  of  the  right  of  a 
State  to  legislate  outside  of  its  own  border.  The  ques- 
tion was  brought  to  an  issue  when,  following  the  dissolu- 
tion of  the  Arkansas  State  Board  of  Underwriters,  fire 
Insurance  belonging  to  similar  boards  In  other  states  con- 
tinued to  do  business  in  Arkansas.     The  Attorney  Gen- 

[295] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

eral  brought  suits  against  over  sixty  fire  insurance  com- 
panies, undertaking  to  collect  fines  of  five  thousand  dol- 
lars from  each  and  claiming  violation  of  the  law  on  these 
grounds. 

In  1899  the  Circuit  Court  of  Pulaski  County,  Ar- 
kansas, sustained  the  demurrer  of  the  companies  and 
when  the  attorney  general,  refusing  to  accept  the  lower 
court's  decision,  carried  his  case  to  the  Supreme  Court; 
the  Supreme  Court,  in  1900,  unanimously  sustained  the 
finding  of  the  lower  court  that  the  State  of  Arkansas 
could  not  constitutionally  enforce  a  law  extra-territorial 
In  effect. 

The  attorney  general  subsequently  became  Governor 
of  the  state,  and  he  then  sought  to  enact  a  law  which 
should  explicitly  prohibit  companies,  belonging  to  com- 
binations for  rating  purposes  outside  of  the  State  of 
Arkansas,  from  doing  business  within  the  state,  but  failed 
to  get  his  bills  accepted  by  the  legislature. 

In  Texas,  an  anti-trust  law,  passed  about  1899,  was 
decided  by  the  Texas  Supreme  Court  to  be  applicable  to 
fire  insurance  companies.  The  companies  protested  and, 
in  1899,  Texas,  after  several  years  of  violent  agitation, 
passed  an  anti-trust  law  making  it  specifically  applicable 
to  fire  Insurance  companies.  Under  the  prior  law  the 
insurance  companies  in  Texas  had  used  rates  promulgated 
by  Jalonlck's  Rating  Bureau  at  Dallas.  Now  they 
ceased  doing  so.  Local  boards  and  all  organizations  in 
the  state,  having  the  making  and  enforcement  of  rates 
as  their  object,  were  disbanded.  The  law  containing  the 
extra-territorial  feature  was  decided  to  be  obnoxious  to 
the  constitution  of  the  United  States  by  the  Supreme 
Court  of  Arkansas,  hence  was  claimed  to  be  without 
effect  by  the  Attorney  General  of  the  State. 

[296] 


APPENDIX  VII 
THE  FACTORY  INSURANCE  ASSOCIATION 

The  Factory  Insurance  Association  was  organized  in 
Boston  in  April,  1890.  Its  object  was  to  furnish  an  or- 
ganization of  stock  fire  insurance  companies  to  compete 
with  the  factory  mutuals  for  mill  risks  and  to  retain  this 
class  of  business  for  the  stock  fire  insurance  companies. 
It  grew  out  of  a  recognition  of  the  fact  that,  if  the  stock 
fire  insurance  companies  were  to  compete  successfully 
with  the  factory  mutuals,  they  must  themselves  adopt 
many  of  the  methods  by  which  the  factory  mutuals  had 
so  successfully  developed.  The  factory  association  was 
to  employ  a  corps  of  inspectors  to  make  regular  and  sys- 
tematic inspection  of  all  risks  submitted  and  accepted, 
and  to  lodge  in  the  hands  of  a  single  administrative  body 
full  power  within  limits  to  solicit,  pass  on,  and  accept 
factory  risks. 

The  originators  were  eleven  stock  companies,  includ- 
ing the  Phoenix,  of  New  York,  National,  of  Hartford, 
Phenix,  of  Hartford,  German  American,  Queen,  Royal, 
Liverpool,  London  and  Globe,  Niagara,  Hanover,  Prov- 
idence-Washington, and  the  American,  of  New  York. 
The  first  officers  were  George  P.  Sheldon,  of  the  Phoenix, 
of  New  York,  President;  and  George  P.  Field,  New 
England  Manager  of  the  Royal,  of  Liverpool,  Secretary 
and  Treasurer.  The  Executive  Committee  consisted  of 
representatives  from  the  National,  Phoenix,  of  Hartford, 
Liverpool,   London   and   Globe,   Queen,    and   Hanover. 

[297] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

Headquarters  originally  were  in  Boston;  later  headquar- 
ters were  established  in  Hartford.  The  Association  is 
unincorporated. 

It  now  operates  (191 5)  in  the  eastern,  middle,  and 
southern  states,  including  Maine,  New  Hampshire,  Ver- 
mont, Massachusetts,  Rhode  Island,  Connecticut,  New 
York,  New  Jersey,  Pennsylvania,  Delaware,  Maryland, 
Virginia,  North  Carolina,  South  Carolina,  Georgia,  Ala- 
bama, Mississippi,  Louisiana — in  all,  eighteen  states. 

Originally,  all  companies  that  were  members  of  the 
Association  were  pledged  to  write  maximum  lines  of 
$50,000  at  rates  of  from  twenty-five  to  fifty  cents.  The 
association  was  to  direct  its  efforts  towards  acquiring 
New  England  business,  but  later  was  to  extend  its  opera- 
tions to  the  other  States,  if  thought  desirable. 

The  association  acts  both  as  solicitor  of  business  and 
inspector  of  risks.  It  writes  on  cotton  mills,  woolen 
mills,  worsted  mills,  mixed  mills,  knitting  mills,  silk  mills, 
thread,  upholstery  and  chenille  mills,  boot  and  shoe 
mills,  paper,  rubber  weaving  and  finishing  and  morocco 
mills,  bleacheries,  print  cotton  warehouses,  lace  curtain 
mills,  carpet  mills,  lithographing  and  printing  mills,  metal 
workers,  dyeing  and  finishing,  wholesale  drugs  and  chem- 
icals, wire  mills,  hat  factories,  shirt  factories. 

All  risks  are  carefully  inspected  before  policies  are 
issued.  Each  risk  must  measure  up  to  fixed  standards 
of  fire  protection  and  moral  hazard  in  order  to  be  accept- 
able, and  must  fall  within  one  of  the  foregoing  classes. 
Each  risk  after  acceptance  is  inspected  four  times  a  year, 
and  where  alteration,  repair  or  new  building  is  contem- 
plated, inspectors  are  sent  to  consult  and  advise  with  the 
assured.  Standards  of  construction  and  of  fire  protec- 
tion have  been  carefully  worked  out  by  the  association 

[298] 


APPENDIX  VII 


and  these  are  furnished  without  charge  to  the  assured 
who  contemplates  alterations  or  new  building. 

The  association  uses  forms  and  policies  required  by  the 
states  in  which  it  operates.  Policies  may  be  signed  by 
the  local  agent  placing  the  risk,  or  by  the  resident  in- 
spector of  the  Factory  Association  if  authorized  so  to 
do. 

Rates,  if  risks  applied  for  admission  are  acceptable, 
are  fixed  by  the  Manager  aided  by  reports  from  inspectors. 
Since  the  members  of  the  Association  are  also  members 
of  the  regional  rating  boards  in  the  several  states,  where 
it  operates,  it  is  customary,  when  the  Association  fixes 
a  rate  lower  than  that  fixed  by  the  board  having  jurisdic- 
tion, to  declare  the  rate  open,  so  that  all  companies  may 
compete  for  the  risk  on  equal  terms. 

The  average  rate  per  $ioo  of  insurance,  on  the  class 
of  risks  covered  by  the  Factory  Insurance  Association, 
has  steadily  decreased  since  its  organization,  and  the 
loss  ratio  of  the  Association  as  a  whole  is  said  to  be  sub- 
stantially lower  than  that  of  any  one  of  its  members  in 
the  same  territory. 


[299] 


1 

FIFTY  YEARS  OF  A  CIVILIZING  FORCE                 1 

LIST  OF  OFFICERS  OF  THE  NATIONAL  BOARD  OF  FIREJ 

Date 

President 

Vice-President 

Secretary 

July 

i8,   i866 

James  M.  McLean 

T.  C.  Allyn 

Frank  W.  Ballard 

Feb. 

21 

1867 

« 

L.  J.  Hendee 

Wm.  Connor,  Jr. 

" 

i8 

1868 

(( 

" 

" 

April 

21 

1869 

« 

<< 

(( 

" 

20, 

1870 

Henry  A.  Oakley 

K 

Jas.  M.  Rankin 

u 

19 

1871 

i( 

l< 

<i 

" 

I? 

1872 

(( 

« 

B.  S.  Walcott 

a 

23 

1873 

(( 

« 

Sam  P.  Blagden 

" 

22 

1874 

" 

<{ 

II 

i( 

23 

1875 

<i 

Geo.  L.  Chase 

<( 

" 

26 

1876 

Geo.   L.   Chase 

Charles  Piatt 

E.  Alliger 

a 

25 

1877 

Alfred  G.  Baker 

B.  Lockwood 

(1 

" 

24 

1878 

" 

" 

M.  Bennett,  Jr. 

It 

23 

1879 

« 

<i 

<i 

(1 

28 

1880 

M.  Bennett,  Jr. 

D.  A.  Heald 

John  W.  Murray 

May 

19 

1881 

D.    A.     Heald 

John   W.   Murray 

D.  W.  C.  Skilton 

" 

18 

1882 

(( 

« 

" 

" 

17 

1883 

(( 

" 

i( 

11 

15 

1884 

« 

D.  W.  C.  Skilton 

John  L.  Thomson 

" 

21 

1885 

i( 

K 

II 

11 

20 

1886 

« 

(( 

i( 

" 

5 

1887 

<( 

<( 

« 

" 

17 

1888 

(( 

(1 

« 

" 

16 

1889 

a 

« 

Robert  B.  Beath 

" 

8, 

1890 

<i 

" 

i< 

(1 

7 

1891 

D.  W.  C.  Skilton 

Thos.  H.  Montgomery 

i( 

" 

12 

1892 

" 

" 

« 

" 

18 

1893 

(( 

" 

(1 

11 

10 

1894 

Edw.  A,  Walton 

William  B.  Clark 

" 

i< 

9 

1895 

« 

K 

« 

<( 

14 

1896 

William  B.   Clark 

Henry  W.  Eaton 

<i 

" 

13 

1897 

Henry  W.  Eaton 

E.    C.   Irvin 

i 

K 

12 

1898 

E.    C.    Irvin 

Geo.  P.   Sheldon 

1 

(( 

II 

1899 

« 

K 

« 

<( 

10 

1900 

Geo.    P.    Sheldon 

E.  L.  Ellison 

i( 

a 

9 

1901 

« 

" 

« 

a 

8 

1902 

Robert  B.  Beath 

H.  H.  Hall 

Chas.  A.  Shaw 

" 

14 

1903 

H.  H.  Hall 

John  H.  Washburn 

K 

(( 

12 

1904 

John   H.   Washburn 

Geo.  W.  Burchell 

« 

" 

II 

1905 

« 

i< 

« 

" 

10 

1906 

Geo.  W.  Burchell 

J.  Montgomery  Hare 

C.  G.  Smith 

« 

9 

1907 

<( 

" 

<i 

<( 

14 

,   1908 

J.  Montgomery  Hare 

A.  W.  Damon 

<( 

<( 

13 

1909 

" 

« 

« 

« 

26 

1910 

A.  W.  Damon 

Geo.  W.  Babb 

i 

i( 

II 

1911 

Geo.  W.  Babb 

Wm.  N.  Kremer 

E.  W.  West            f 

(( 

23 

1912 

II 

K 

II                           T 

(( 

22 

,   1913 

Wm.  N.  Kremer 

E.  G.  Richards 

E.  J.  Haynes 

(( 

28 

.   1914 

(1 

R.   M.  Bissell 

II 

(( 

27 

,    1915 

E.    G.    Richards 

II 

II 

[300] 

11 

APPENDIX  VIII 


UNDERWRITERS  FROM  DATE  OF  ORGANIZATION 


Treasurer 


J.  S.  Parish 


Tred.   W.   Arnold 


Marshall  S.  Driggs 


J.  Holman 


Chairman 
Executive  Comm. 


D.  A.  Heald 


E.  W.  Crowell 

Rudolph   Garrigue 
Stephen  Crowell 


Geo.  T.  Hope 


D.  A.  Heald 
Geo.  T.  Hope 
B.  Lockwood 


Peter  Notman 
J.  N.  Dunham 
E.  A.  Walton 


J.  Goodnow 


Geo.  P.  Sheldon 
Henry  W.  Eaton 
E.  F.  Beddall 
Marshall  S.  Driggs 

a 

Geo.  P.  Sheldon 
H.  E.  Bowers 


H.  H.  Hall 

John  H.  Washburn 

Wm.  N.  Kremer 

J.  Montgomery  Hare 

A.  W.  Damon 

(( 

Geo.  W.  Babb 

it 

Wm.  N.  Kremer 

E.  G.  Richards 

R.  M.  Bissell 

F.  C.  Buswell 


Secretary 
Executive  Comm. 


F.  W.  Ballard 
C.  B.  Whiting 


A.  J.  Smith,  pro  tem. 
W.  H.  Post 
Henry  K.  Miller 


Executive  Officer 

(See  Note) 


Thos.  H.  Montgomery 


W.  E.  Mallalieu 


Henry  K.  Miller 


W.  E. 


Mallalieu 


(Note).  The  title  of  the  executive  officer  was  General  Agent,  1872-1878  and 
1899-1913;  in  1913  it  was  changed  to  General  Manager.  1866-1872  and  1878-1899 
the  Secretary  of  the  Executive  Committee  acted  as  executive  officer, 

[301] 


APPENDIX  IX 

Companies  represented  at  the  Original  Convention — ^July  i8,  1866. 


MASSACHUSETTS 


Springfield  Fire  &  Marine 
People's,  Worcester 
North  American,  Boston 


Washington,  Providence 

Equitable,  " 

Merchants,  " 

Narragansett,       " 
Atlantic,  " 


by  J.  N.  Dunham,  Sec. 
A.  N.  Currier,  Sec. 
Albert  Bowker,  Pres. 

RHODE  ISLAND 

by  J.  Kingsbury,  Pres. 
Thos.  G.  Turner,  Pres. 
Walter  Paine,  Sec. 
A.  O.  Peck,  Pres. 
J.  S.  Parish,  Sec. 


NEW  YORK  STATE 
Glens'  Falls,  Glens  Falls  by  R.  M.  Little,  Pres. 

Western,  BuflEalo  E.  B.  Smith,  Pres. 

CONNECTICUT 
Merchants,  Hartford  by  M.  Howard,  Pres. 

Home,  New  Haven  D.  R.  Satterlee,  Pres. 

North  American,  Hartford  A.  F.  Hastings,  Pres. 

New   England,  "  W.  C.  Goodrich,  Gen.  Agt. 

Cnr,  "  C.  P.  Webster,  Pres. 

PENNSYLVANIA 

Phila.  Union  Mutual,  Philadelphia        by  John  Morse,  Sec. 
Girard,  "  A.  F.  Gillette,  Agent. 

MARYLAND 
National  Ins.   Co.,  Baltimore  by  John  B.  Seidenstriker,  Pres. 

Associated  Firemen's,      "  John  Dukehart,  Sec. 

Merch'ts  &  Mech'ics,       "  N.  P.  Campbell,  Pres. 

Union,  "  John  Coates,  Pres. 

Washington,  "  Thos.  T.  Canby,  Pres. 


Jefferson,  Albemarle  Co. 
James  River,  " 

Ins.  Co.  of  America  " 


Sun,  Cleveland, 

Germania,  " 

Teutonia,  " 

State  Fire,  " 

Cleveland,  " 


VIRGINIA 

by  W.  C.  Carrington,  Pres. 
W.  C.  Carrington,  Pres. 
Chas.  Piatt. 

OHIO 


[302] 


by  E. 

C. 

Rouse, 

Sec. 

E. 

C. 

Rouse, 

Sec. 

E. 

C. 

Rouse, 

Sec. 

J. 

B. 

Merriam,  Treas. 

E. 

B. 

Smith. 

APPENDIX  IX 


ILLINOIS 

Chicago  Firemen's,  Chicago 
The  Chicago  Board  of  Fire  Underwrit- 
ers, Chicago 

Illinois  Mutual,  Alton 


Thos.  Goodman. 
Samuel  T.  Atwater. 
Wm.  E.  Rollo. 
John  C.  Dore. 
Lewis  Kellenberger. 


CITY  OF  NEW  YORK 

^TNA 

by  F.  A.  Conkling,  Pres. 

Astor 

R.  D.  Hart,  Pres. 

Atlantic 

John  D.  Cocks,  Pres. 

Adriatic 

Wm.  A.  Seaver,  Pres. 

Citizens 

Jas.  M.  McLean,  Pres. 

E.  A.  Walton,  Sec. 

Clinton 

J.  B.  Ames,  Sec. 

Columbia, 

Alfred  Douglass,  Pres. 

Continental 

Geo.  T.  Hope,  Pres. 

Corn  Exchange 

Geo.  A.  Dresser,  Sec. 

Excelsior 

M.  T.  Hodges,  Pres. 

Exchange 

Rich.  I.  C.  Combs,  Sec. 

Firemen's 

J.  V.  Harriot. 

Fulton 

Jas.  M.  Rankin,  Sec. 

Gebhard 

Jno.  R.  Smith,  Sec. 

Greenwich 

Saml.  C.  Harriot,  Pres. 

Germania 

R.  Garrigue,  Pres. 

Globe 

Leonard  Kirby,  Pres. 

Harmony 

R.  O.  Glover. 

Home 

D.  A.  Heald,  G.  Agt. 

Howard 

Hy.  A.  Oakley,  Sec. 

Williamsburgh  City 

Edmund  Driggs,  Pres. 

Queen 

W.  H.  Ross,  Sec. 

Humboldt 

Wm.  Mulligan,  Pres. 

Irving 

Martin  L.   Crowell,  Sec. 

International 

C.  A.  Hine,  Sec. 

Lenox 

Geo.  A.  Jarvis,  Pres. 

Lorillard 

Carlisle  Norwood,  Pres. 

Liverpool  &  London 

Alfred  Pell,  Jr. 

Manhattan 

A.  J.  Smith,  Pres. 

Mercantile 

*  Wm.  A.  Anderson,  Sec. 

Merchants 

J.  L.  Douglass,  Sec. 

Metropolitan 

E.  A.  Stansbury,  V.-Pres. 

Montauk 

Wm.  Ellsworth,  Pres. 

New  Amsterdam 

David  S.  Manners,  Pres. 

Niagara 

Peter  Notman,  Sec. 

North  American 

R.  W.  Bleecker,  Sec. 

Phenix 

E.  W.  Crowell,  V.-Pres. 

Republic 

D.  F.  Curry,  Sec. 

Resolute 

Wm.  M.  Randall,  Sec. 

Security 

T.  W.  Birdsall,  Pres. 

Standard 

*  Wm.  M.  St.  John,  Sec. 

Washington 

Wm.  K.  Lathrop,  Sec. 

YoNKERs  &  N.  York 

*John  W.  Murray,  Sec. 

Importers  &  Traders 

F.  W.  Ballard,  Sec. 

*  Survivors  of  original 

convention. 

[303] 


APPENDIX  X 


ROLL  OF  MEMBERS  OF  THE  NATIONAL  BOARD  OF  FIRE 
UNDERWRITERS  (APRIL,  1916) 


Company 
Aachen  and  Munich  Fire 

^TNA 

Agricultural 
Albany 

Allemannia  Fire 
Alliance 
American 
American  Central 
Arizona  Fire 
Atlas  Assurance 
Automobile 
Boston 

British  America  Assurance 
Buffalo  German 
Caledonian 

Camden  Fire  Ins.  Association 
Century 
Citizens 

City  of  New  York 
Columbian  National 
Commerce 

Commercial  Union  Assur. 
Commercial  Union  Fire 
Commonwealth 
Concordia  Fire 
Connecticut  Fire 
Continental 
County  Fire  of  Phila. 
Detroit  F.  &  M. 
Detroit  National 
Dixie  Fire 
Dubuque  F.  &  M. 
•Equitable  F.  &  M. 
Farmers'  Fire 
Fire  Association 
Fireman's  Fund 


[304] 


Location 

Germany. 
Hartford,  Ct. 
Watertown,  N.  Y. 
Albany,  N.  Y. 
Pittsburgh,  Pa. 
Philadelphia,  Pa. 
Newark,  N.  J. 
St.  Louis,  Mo. 
Phoenix,  Ariz. 
London. 
Hartford,  Ct. 
Boston,  Mass. 
Toronto,  Canada. 
Buffalo,  N.  Y. 
Scotland. 
Camden,  N.  J. 
Edinburgh 
St.  Louis,  Mo. 
New  York. 
Detroit,  Mich. 
Albany,  N.  Y. 
London. 
New  York. 
New  York. 
Milwaukee,  Wis. 
Hartford,  Ct. 
New  York. 
Philadelphia,  Pa. 
Detroit,  Mich. 
Detroit,  Mich. 
Greensboro,  N.  C. 
Dubuque,  la. 
Providence,  R.  I. 
York,  Pa. 
Philadelphia,  Pa. 
San  Francisco,  Cal. 


APPENDIX  X 


Company 

Firemen's 

Franklin  Fire 

Frankona  Reinsurance 

General  Fire 

Georgia  Home 

German  Alliance 

German  American 

German  American  of  Pa. 

German  American  Fire  of  D.  C. 
*Germania  Fire 
*Girard  F.  &  M. 
*Glens  Falls 

Globe  and  Rutgers 

Granite  State 

Hamburg-Bremen  Fire 

Hanover  Fire 

Hartford  Fire 
*Home 

Imperial  Assurance 

Insurance  Co.  of  N.  America 

Insurance  Company,  State  of  Pa. 

Knickerbocker 

Law,  Union  and  Rock 
♦Liverpool  and  London  and  Globe 

Liverpool  and  London  and  Globe 

London  and  Lancashire  Fire 

London  Assurance  Corporation 

Massachusetts  F.  &  M. 

Mechanics'  Fire 

Mechanics  and  Traders 

Mercantile  of  America 

Michigan  Commercial 

Michigan  F.  &  M. 

Milwaukee-Mechanics 

Munich  Reinsurance 

National  Fire 

Nationale  Fire 

National  Union 

National  Union  Fire 

Newark  Fire 

New  Brunswick  Fire 

New  Hampshire  Fire 

New  Jersey  Fire 
♦Niagara  Fire 

Nord-Deutsche 

Norskelloyd 


Location 
Newark,  N.  J. 
Philadelphia,  Pa. 
Germany. 
Paris. 

Columbus,  Ga. 
New  York. 
New  York. 
Pittsburgh,  Pa. 
Washington,  D.  C. 
New  York. 
Philadelphia,   Pa. 
Glens  Falls,  N.  Y. 
New  York. 
Portsmouth,  N.  H. 
Germany. 
New  York. 
Hartford,  Ct. 
New  York. 
New  York. 
Philadelphia,  Pa. 
Philadelphia,  Pa. 
New  York, 
London. 
Liverpool. 
New  York. 
Liverpool. 
London. 
Boston,  Mass. 
Philadelphia,  Pa. 
New  Orleans,  La. 
New  York. 
Lansing,  Mich. 
Detroit,  Mich. 
Milwaukee,  Wis. 
Germany. 
Hartford,  Ct. 
Paris. 

Washington,  D.  C. 
Pittsburgh,  Pa. 
Newark,  N.  J. 
New  Brunswick,  N.  J. 
Manchester,  N.  H. 
Newark,  N.  J. 
New  York. 
Hamburg. 
Norway. 


[305] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 


Company 

Northern 

Northern  Assurance 
North  British  and  Mercantile 
Northwestern  National 
Norwich  Union  Fire  Ins.  Society 
Old  Colony 
Orient 
Pacific  Fire 
Palatine 

Pennsylvania  Fire 
People's  National  Fire 
Petersburg  Savings  and  Ins.  Co. 
Phenix  Fire 
Phcenix 

Phcenlx  Assurance 
Portsmouth  Fire  Association 
Potomac  of  D.  C. 
Providence-Washington 
Prussian  National 
Queen 
Reliance 
Rhode  Island 
Rossia 
Royal 

Royal  Exchange  Assurance 
St.  Paul  F.  &  M. 
Safeguard  of  New  York 
Salamandra 

Scottish  Union  and  National 
Security 
*Springfield  F.  &  M. 
Standard 
Standard  Fire 
State  Assurance 
Stuyvesant 
Sun  Insurance  Office 
Svea  Fire  and  Life 
Swiss  National 
Teutonia  Fire 
Twin  City  Fire 
Union  Assur.  Society 
Union  Fire 
United  Firemen's 
United  States  Fire 
Urbaine  Fire 
Virginia  F.  &  M. 


Location 
New  York. 
London. 

London  and  Edinburgh. 
Milwaukee. 
England. 
Boston,  Mass. 
Hartford,  Ct. 
New  York. 
London. 

Philadelphia,  Pa. 
Philadelphia,  Pa. 
Petersburg,  Va. 
Paris. 

Hartford,  Ct. 
London. 

Portsmouth,  N.  H. 
Washington,  D.  C. 
Providence,  R.  I. 
Germany. 
New  York. 
Philadelphia,  Pa. 
Providence,  R.  I. 
Petrograd. 
Liverpool. 
London. 
St.  Paul,  Minn. 
Hartford,  Ct. 
Petrograd. 
Edinburgh. 
New  Haven,  Ct. 
Springfield,  Mass. 
Trenton,  N.  J. 
Hartford,  Ct. 
Liverpool. 
New  York. 
London. 
Sweden. 
Basle. 

Pittsbugh,  Pa. 
Minneapolis,  Minn. 
London. 
Paris. 

Philadelphia,  Pa. 
New  York. 
Paris. 
Richmond,  Va. 


[306] 


J 


APPENDIX  X 


Company  Location 

Westchester  Fire  New  York, 

Western  Pittsburgh,  Pa. 

Western  Assurance  Toronto,  Canada. 

*WiLLiAMSBURGH  CiTY  FiRE  New  York. 

Yorkshire  York,  Eng. 

(Note).    Companies  marked  with  asterisk  (*)  were  represented  at  the 

original  convention  of  July  i8,  1866. 


[307] 


APPENDIX  XI 

CONSTITUTION  AND  BY-LAWS 

Constitution 

This  Association  shall  be  known  as  The  National  Board  of  Fire  Under- 
writers OF  the  United  States. 

Any  Stock  Fire  Insurance  Company  of  the  United  States,  or  any  Stock 
Fire  Insurance  Company  from  a  Foreign  Government  doing  business  in  the 
United  States  may  become  a  member  of  the  Board,  on  being  duly  elected 
at  either  a  regular  or  special  meeting  of  the  Board,  or  by  the  Executive 
Committee.  In  case  of  any  Foreign  Fire  Insurance  Company  having  sev- 
eral Resident  or  District  Managers  in  the  United  States,  such  Managers 
may  attend  the  meetings  of  the  Board  and  be  entitled  to  the  privileges  of 
the  floor  and  collectively,  through  one  of  their  number,  designated  by  them, 
cast  a  single  vote  for  the  company,  or,  if  the  company  so  elect,  its  vote  may 
be  cast  by  such  person  as  it  may  commission  for  that  purpose. 

The  objects  and  purposes  of  this  Board  are  declared  to  be  as  follows: 

purposes. 

ist.  To  promote  harmony,  correct  practices,  and  the  principles  of  sound 
underwriting;  to  devise  and  give  effect  to  measures  for  the  protection  of  the 
common  interests,  and  the  promotion  of  such  laws  and  regulations  as  will 
secure  stability  and  solidity  to  capital  employed  in  the  business  of  Fire  In- 
surance, and  protect  it  against  oppressive,  unjust,  and  discriminative  legis- 
lation. 

2d.  To  repress  incendiarism  and  arson  by  combining  in  suitable  meas- 
ures for  the  apprehension,  conviction,  and  punishment  of  criminals  guilty 
of  that  crime. 

3d.  To  gather  such  statistics  and  establish  such  classification  of  hazards 
as  may  be  for  the  interest  of  members. 

4th.  To  secure  the  adoption  of  uniform  and  correct  policy  forms  and 
clauses,  and  to  endeavor  to  agree  upon  such  rules  and  regulations  in  ref- 
erence to  the  adjustment  of  losses  as  may  be  desirable  and  in  the  interest 
of  all  concerned. 

5th.  To  influence  the  introduction  of  improved  and  safe  methods  of 
building  construction,  encourage  the  adoption  of  fire  protective  measures, 
secure  efficient  organization  and  equipment  of  fire  departments,  with  ade- 
quate and  improved  water  systems,  and  establish  rules  designed  to  regulate 
all  hazards  constituting  a  menace  to  the  business.  Every  member  shall  be 
in  honor  bound  to  cooperate  with  every  other  member  to  accomplish  the  de- 
sired objects  and  purposes  of  the  Board. 

OFFICERS. 

The  officers  of  the  Board  shall  consist  of  a  President,  Vice-President, 
Treasurer  and  Secretary,  with  the  usual  powers  and  duties  of  such  officers, 

[308] 


APPENDIX  XI 


tQ  be  chosen  by  ballot  at  each  annual  meeting  of  the  Board,  and  to  hold 
office  for  one  year,  or  until  their  successors  are  chosen;  and  only  one  rep- 
resentative from  a  company  shall  be  eligible  to  office  at  the  same  time. 

EXECUTIVE  AND  STANDING  COMMITTEES,      [SEE  ALSO  BY-LAWS.] 

There  shall  be  an  Executive  Committee,  to  consist  of  eleven  members, 
who  shall  be  officers  or  managers  of  companies,  and  who  shall  be  elected 
by  ballot  for  three  years  each,  and  the  terms  of  their  office  shall  be  so  ar- 
ranged that  three  shall  retire  one  year,  and  four  on  each  of  the  two  follow- 
ing years. 

The  Board  shall  have  power  to  appoint  such  other  Standing  Committees 
as  the  requirements  of  its  business  may  make  necessary  or  desirable. 

BY-LAWS. 

The  Board  shall  also  have  power  to  make  such  By-Laws  for  the  govern- 
ment of  its  aflfairs  as  may  become  necessary. 

AMENDMENTS. 

This  Constitution  can  be  altered  or  changed  only  at  an  annual  or  called 
meeting  of  the  Board,  thirty  days'  previous  notice  of  the  alteration  having 
been  given  to  the  members,  and  then  only  by  a  vote  of  two-thirds  of  the 
members  present  at  the  meeting. 


BY-LAWS 


MEETINGS. 

The  Annual  Meeting  shall  be  held  on  the  fourth  Thursday  in  May  in 
each  year,  in  the  city  of  New  York,  unless  some  other  time  and  place  be 
designated  by  the  Board  at  its  preceding  meeting,  or  by  the  Executive  Com- 
mittee at  least  one  month  in  advance.  There  may  be  held  a  semi-annual 
meeting  at  such  time  and  place  as  the  Board  and  the  Executive  Committee 
may  direct. 

Special  meetings  may  be  called  by  the  President,  on  the  request  of  the 
Executive  Committee,  or  on  the  written  request  of  thirteen  members.  At  all 
meetings,  twenty  members  shall  constitute  a  quorum  for  the  transaction  of 
business. 

EXECUTIVE   COMMITTEE. 

The  Executive  Committee  shall  have  power  to  fill  vacancies  which  may 
occur  on  the  committee,  and  may  also  elect  as  Honorary  Members  such 
executive  officers  of  companies  as  may  be  entitled  to  such  consideration  by 
the  length  and  value  of  their  services. 

No  retiring  member  of  the  Executive  Committee  shall  be  eligible  to  a  re- 
election until  one  year  has  elapsed  after  the  expiration  of  his  term  of  office 
as  one  of  the  committee. 

No  company  shall  be  represented  on  the  Executive  Committee  by  more 
than  one  officer,  except  in  the  case  of  Honorary  or  Ex-officio  Members,  when 
another  officer  may  also  be  elected  one  of  the  committee. 

Companies,  members  of  the  Board,  not  represented  on  the  committee, 
shall  be  entitled  to  be  represented  at  its  meetings  with  the  privilege  of  the 

[309] 


FIFTY  YEARS  OF  A  CIVILIZING  FORCE 

floor  and  the  right  to  vote;  but  traveling  expenses  shall  be  allowed  only  to 
the  regularly  elected  members  of  the  committee. 

The  Executive  Committee  is  authorized  to  exercise  all  necessary  powers 
to  promote  the  purposes  of  the  Board,  as  herein  declared,  and  to  that  end 
shall  consider  all  measures  proposed  for  the  common  welfare,  and  endeavor 
to  secure  the  adoption  by  its  members  of  all  such  measures  as  shall,  in 
their  judgment,   be   valuable   and  practicable. 

The  Executive  Committee  shall  also  endeavor  to  procure  uniformity  in 
the  form  of  policy  to  be  used,  and  more  careful  modes  of  writing  policies. 
They  shall  also  consider  and  recommend  some  mode  of  obviating  the  evils 
of  loose  and  indefinite  underwriting,  such  as  the  too  general  permission  of 
other  insurance  without  notice;  the  granting  of  extra  privileges  without 
charge;  excessive  insurance;  hasty  adjustment  and  payment  of  losses,  and 
kindred  evils;  and  shall  also  consider  any  other  matters  promotive  of 
sound  underwriting  and  the  general  good  of  the  members  of  the  Board. 

The  Executive  Committee  shall  also  have  power  to  appoint  an  officer  to 
be  known  as  the  General  Manager  of  the  National  Board  of  Fire  Under- 
writers, whose  duty  it  shall  be  under  the  advice  and  direction  of  the  Com- 
mittee, to  use  all  proper  means  to  promote  the  purposes  of  this  Board  and 
the  best  interests  of  its  members;  also  to  act  as  Secretary  for  the  Executive 
and  other  Committees  of  the  Board.  They  shall  also  have  power  to  employ 
such  other  salaried  representatives  and  clerical  help  as  may  from  time  to 
time  appear  necessary  and  determine  the  compensation  for  their  services; 
to  incur  necessary  incidental  expenses;  also  to  provide  rooms  suitable  for  the 
business  of  the  Board. 

No  officer  or  member  of  the  Executive  Committee  shall  receive  any  com- 
pensation for  services  except  by  vote  of  the  Board  at  its  annual  meeting. 

EX-OFFICIO  AND  HONORARY  MEMBERS  OF  THE  EXECUTIVE  COMMITTEE. 

The  President  and  Vice-President  of  the  Board  shall  be  ex-officio  mem- 
bers of  the  Executive  Committee,  and  of  all  Standing  Committees  of  the 
Board. 

The  Secretary  and  Treasurer  shall  also  be  ex-officio  members  of  the 
Executive  Committee. 

The  chairmen  of  the  several  Standing  Committees  shall  be  ex-officio  mem- 
bers of  the  Executive  Committee. 

Ex-Presidents  of  the  Board,  while  remaining  officers  of  Fire  Insurance 
Companies  members  of  the  Board,  shall  be  honorary  members  of  the  Execu- 
tive Committee  with  the  right  to  vote  and  privilege  of  the  floor. 

EXPENSES. 

The  expenses  of  the  Board  shall  be  borne  by  the  several  companies  form- 
ing the  same  in  proportion  to  the  amount  of  their  net  fire  premiums  in  the 
United  States  as  reported  to  State  Insurance  Departments,  the  expenses  of 
any  fiscal  year  to  be  apportioned  upon  the  receipts  for  the  preceding  cal- 
endar year. 

The  assessments  shall  be  made  by  the  Board  or  the  Executive  Committee, 
and  be  collected  by  the  Treasurer. 

STANDING    COMMITTEES. 
There   shall   be   appointed   by  the   President,   at   each   annual   meeting, 
the  following  Standing  Committees,  to  consist  of  not  less  than  five  members 
each: 

[310] 


APPENDIX  XI 


A  Committee  on  Finance. 

A  Committee  on  Laws. 

A  Committee  on  Incendiarism  and  Arson. 

A  Committee  on  Statistics  and  Origin  of  Fires. 

A  Committee  on  Fire  Prevention. 

A  Committee  on  Lighting,  Heating,  and  Engineering  Standards. 

A  Committee  on  Construction  of  Buildings. 

A  Committee  on  Adjustments. 

A  Committee  on  Clauses  and  Forms. 

A  Committee  on  Membership. 

These  committees  shall  attend  to  the  duties  that  their  several  titles  imply, 
and  shall  report  annually  to  the  Board,  or  may  report  at  any  time  to  the 
Executive  Committee. 

WITHDRAWALS. 

Any  company,  a  member  of  this  Association,  may  honorably  withdraw 
from  the  same  by  giving  three  months'  notice,  and  paying  all  its  assess- 
ments and  dues. 

ORDER   OF   BUSINESS. 

At  each  meeting  of  the  Board  the  following  shall  be  the  order  of  business. 

1.  Calling  of  Roll. 

2.  Reading  of  Minutes. 

3.  President's  Address. 

4.  Treasurer's  Report. 

5.  Report  of  Executive  Committee. 

6.  Reports  of  Standing  Committees. 

7.  Appointment  Nominating  Committee. 

8.  Reports  of  Special  Committees. 

9.  General  or  Special  Orders. 

10.  Deferred  Business. 

11.  Miscellaneous  or  New  Business. 

12.  Election  of  Officers. 

13.  Special  Resolutions. 

14.  Adjournment. 

AMENDMENTS. 

These  By-Laws  may  be  amended  at  any  meeting  of  the  Board  by  a  two- 
thirds  vote  of  its  members  present,  thirty  days'  previous  notice  having  been 
given  to  the  members  of  the  Board  of  the  intention  to  amend. 


[311] 


INDEX 


Actuarial  Bureau,  detection  of  fraud 
by,    156 

efforts   of  toward  fair  rates,  202 

established,   132,  158 

interprets    insurance    experience,    157 
Adamson,    Fire    Commissioner,    on    pre- 
vention  of   fires,    172 
^tna    Insurance    Company,    agents    in 
Massachusetts,   245 

establishes,    general    ofBce    in    Cincin- 
nati,  241 
Agency   commissions,   244-248 

company  efforts  to  control,   247 

dictated  by   agents,   246 

early   absence   of,   244 

report   on    to    Massachusetts   Commis- 
sioner, 244 
Agency  systems,  anomalous  relations  of 
company    and    agent,    246 

appointment       of       first       extra-state 
agents,  234 

beginnings  of,  by  Insurance  Company 
of   North   America,   235 

development  of,  233—243 

first  American  oifice,  233 

first  certificate   of  authority,  233 

first  known  reference  to,  233 

first  mail  order  company,  234 

Insurance  Company  of  North  America 
appoints    agents   outside   state,    234 

slow  growth   of,  24s 

standards   of  qualifications,   248 

Statistics      of     early      agencies,      242, 
243 
"Agreement   of    1900,   The,"   failure   of, 

87 

Alabama  organizes  insurance  depart- 
ment, 269 

Alaska  organizes  insurance  department, 
274 

Allen,  Zachariah,  head  of  early  "factory 
mutuals,"   165 

Alliger,  on  mansard  roofs,  40 

AUyn,  Timothy,  first  vice  president  Na- 
tional   Board,    14 

American  and  European  fire  losses  com- 
pared,  164 

American  Fire  Insurance  Company  of 
Philadelphia,   founded,   236 

American  Insurance  Company,  organ- 
izer of  Factory  Insurance  Associa- 
tion,  297 

American  underwriting,  introduction  of, 
9 

Analytical  Schedule,  Dean  s,  204 

Anti-compact  laws,  283-296 

Arkansas'    unconstitutional    law,    295 
Beveridge's    bureau    declared    unlaw- 
ful, 290 


[3 


beginnings  of  rate-cutting,  285 

companies   fined   in   Missouri   for   vio- 
lating,  295 

condemned     by     New     York     probing 
committee,   123 

dissolution    of   Missouri   underwriting 
boards,  293 

early    realization    of    danger    of    rate 
cutting,   283 

failure     of    early     companies     to     co- 
operate,  284 

first  passed  in  Ohio,  289 

Maine  enacts,  291;  repeals,  291 

Michigan   passes,   76,    289 

Michigan  Supreme  Court  declares  law 
constitutional,   290 

Missouri's  drastic  legislation,  293 

Nebraska  enacts,  290 

Ohio    legislature    passes,    76 

originates  in  Grand  Rapids,  76 

passed  in  Nebraska,  T] 

passed  in  Texas,  yy 

public's     persistent     belief     that      co- 
operation meant  monopoly,  287 

Texas    applies    anti-trust    laws    to    in- 
surance, 296 

statistics  of,  292 

Texas  enacts,  290 
Architects,  American  Institute  of,  joins 
N.  F.  P.  A.  publicity  campaign,  170 
Arizona     organizes     insurance     depart- 
ment, 273 
Arkansas  anti-compact  law  declared  un- 
constitutional,  295 

organizes    insurance    department,    272 
Arson   convictions   result   from   National 

Board's  fund,   141 
"Articles  of  Association  and  Obligation, 

The,"   25 
Association     of     Fire     Insurance     Com- 
panies of  New  York  founded,   250 

makes    concession    of    5%   commission, 

25.1 

passing  of,  252 

Association  of  Fire  Underwriters  of 
Arkansas,  64 

Association  of  Fire  Underwriters  of 
Missouri,  64 

Association  of  the  Northwest,  first  aux- 
iliary  board,    organized,    37 

Atlantic  Fire  and  Marine  Insurance 
Company,   agency   commissions,   244 

Babb,   George   W.,   elected   president  of 
National  Board,   131    _ 
on  legislative   investigations  of  insur- 
ance,  117 
secures  European  fire  data,  142 
Bach,  Andrew,  233 

13] 


INDEX 


Bach,  Theophilac,  233 

Bache    Bros.,   early    endeavors    for   har- 
mony, 283 

Baker,  Alfred  G.,  elected  president  Na- 
tional Board,   59,  60,  83 

Baker,    Charles    Whiting,    on    Conserva- 
tion of  National  Resources,   164 

Ballard,    Frank   W.,   first   secretary   Na- 
tional Board,  14 

Baltimore  conflagration,  95 

Barbon,    Nicholas,  original   underwriter, 
7 

Beath,  Robert  B.,  elected  president  Na- 
tional Board,  92 

Bennet,  J.  B.,  a  pioneer  agent  in  middle 
west,  239  „.     .         .   ,  , 

establishes  ^tna  s   Cincinnati  branch, 

241 
publishes  Insurance  Expositor,  242 
Bennett,  M.,  Jr.,  49,  77 
Beveridge,  David,  establishes  inspection 

and  rating  bureau  in  Detroit,  289 
Bigelow,   John   P.,   compiles   first  insur- 
ance   report    of    Massachusetts    in- 
surance,  266 
Board    of    Consulting    Engineers,    incep- 
tion of  idea  of,  88 
Boston,  conflagration   in,   32 
fire  prevention  in,    172 
Herald,  only  paper  to  print  N.  F.  P. 

A.  standards,  168 
plans  high-pressure  system,  147 
saving       through       Fire       Prevention 
Bureau,  173 
Brewer,    Hooker    and,    appointed    Hart- 
ford agents  in  Vermont,  237 
"Broad  Street  Fire,"  10 
Brokerage  system.  The,  249-260 
Brokers,     company     arguments     against, 

discussed    by     Massachusetts    legisla- 
tive committee,  259 
first  appearance  of,  251 
growing  influence  of,  258 
opposed  by  New  York  Board  of  Fire 

Insurance   Companies,   252 
recognition  of  by  companies,  254 
recognized     by     committee     of     New 
York  Board  of  Fire  Insurance  Com- 
panies, 252 
use    desirable   to    force   acceptance   of 
undesirable   risks,   260 
Brown,  Morell  O.,  138 
Building   law,   model,   killed  in  Albany, 

80 
Burchell,   George  W.,  elected  president 
National  Board,   113 
on  San  Francisco  fire,  loi 
on  the  country's  fire-waste,   104 
Bureau  of  Statistics,  formation  of,  47 
By-laws,    Constitution    and,   of   National 
Board,  308-311 


California    organized    insurance    depart- 
ment, 270 
Canadian  Club  cooperates  in  N.  F.  P.  A. 


campaign,    170 
Canadian  Manufacturers  Association  co- 


[314] 


operates  in  N.   F.   P.   A.   campaign, 
170 
Chase,  George  L.,  49;  elected  president 

of   National   Board,    52 
Chicago,    ban   lifted    from,    by    National 
Board,  46 
fire  department  investigated,  41,  42 
fire  inviting  conditions  in,  42  et  seq. 
fires  in  1914,  163 

National       Board       companies      with- 
drawn from,  46 
National    Board    demands   reforms   in 

fire  prevention  in,  45 
National    Board    threatens    to    discon- 
tinue insurance  in,  45 
politics  in   fire   department  of,   42 
Underwriters'    Laboratories,    178 
Chicago    Board    of    Fire    Underwriters 
oppose    brokerage   commissions,    255 
"Chicago     Compact,"     establishment    of, 

to  combat  rate  cutting,  24 
Chicago    fire.    Executive    Committee    de- 
liberations following,  34 
rates  raised  after,   35 
reorganization      of      National      Board 

after,   30 
resuscitates       languishing       National 

Board,  28 
revival  of  local  boards  after,  30 
weeds  out  weak  companies,  29 
wildcat  insurance  following,  33 
Cincinnati     establishes     fire     prevention 

bureau,  172 

Clark,  William  B.,  President,  quoted,  85 

Co-Insurance      Clause      commended      by 

New    York    Legislative    Committee, 

123 

Colonial  Insurance  Company  establishes 

agencies,  240 
Colorado     organizes    insurance     depart- 
ment, 273 
Commissions  a  lever  to  obtain  new  busi- 
ness, 251 
efforts    of    old    companies    to    enforce 
no  commission  rule,  247 
Committee  of  Fifteen  to  rehabilitate  Na- 
tional Board,  52 
Committee    of    Twenty,    remarkable    re- 
port of,  comcerning  San  Francisco, 

97 
reports  on  congested  districts  of  cities, 
96 

Committee  of  Twenty-seven  attempts  to 
revive  rate  control,  87 

Committee  of  Retrenchment  of  National 
Board,  54 
drastic   reduction   of  expenses  recom- 
mended by,  55 

Companies   represented   at  original   con- 
vention,  302,   303 

Connecticut      organizes     insurance     de- 
partment, 270 

Connecticut    Fire     Insurance     Company 
agency   commissions,   244 
agency  system  in   1856,   243 

Conservation      of      Natural      Resources, 
Charles  Whiting  Baker  on,  164 

Constitution    and    By-laws    of    National 
Board,  308—311 


INDEX 


Continental  Insurance  Company,  agency- 
commissions,  244 
agency  force  in  'so's,  242,  243 
Contributors  for  Insuring  Houses,  etc., 

8 
Cook,  James  M.,   quoted,  268 
Crosby,   Uberto   C,  made   honorary  life 
member    of    Executive    Committee, 
136 
Crowell,   E.   W.,    on  first  committee  on 
conference,   3 
on  rate-cutting,  25  _ 
opens  first  convention,  10 
personality   of,    5 

Damon,    Alonzo    W.,    elected    president 
of  National  Board,   131     . 
legislative   investigation   period   in   un- 
derwriting announced   by,    115 

Dean,    A.    F.,    analyzes    causes   of   Wis- 
consin  opposition,   277 
originates   Analytical    Schedule,   203 

Delaware    establishes    insurance    depart- 
ment, 273 

District    of    Columbia    organizes    insur- 
ance department,  274 

Eagle  Fire  Company  of  New  York  ex- 
tends insurance  outside  city,  236 
appointed   Albany   agent,   236 
first  mail  order  company,  234 
Eaton,   Henry   W.,   first   president   from 

foreign  companies,  86 
Electricity,    beginning    of    as    cause    of 
fire  loss,  80 
examples  of  as  origin  of  fires,  89,  90 
rapid  increase  in  fires  caused  by,   91 
Elevator  shafts  as  fire  vents,  40 
Ellis,   Charles,   235 
Experience   Grading  and   Rating   Sched 

ule,  Richards',  204 
Ewing,  James,  235,  236 

Factory  Improvement  Committee  organ- 
ized,   74 
Factory   Insurance  Association,  297-299 
area  of  operations  of,  298 
careful  inspection  of  risks,  298 
first  officers,  297 
objects,  297 
organized,  73,  74,  297 
rates,  fixing  of,  299 
"Factory   Mutuals,"   beginnings   of,    165 
Fall     River,     Massachusetts,     large    fire 

in,  149 
Federal    Government    borrows    National 
Board  engineer  to  investigate  build- 
ings,  147 
Fetter,    W.    J.,    establishes    Kansas   City 

Rating  Bureau,   294 
Field,     George     P.,    first    secretary    and 
treasurer    Factory    Insurance    Asso- 
ciation, 297 
Fire  apparatus,  methods  of  testing,   14S 
Fire  causes,  defective  insulation,   184 
electricity   as,   89,   90 
multitude  of  unlocked  for,   179,   i8o_ 
Fire    departments,    London's    first    paid, 

^'  r 

[3 


newness  of  effective,  41 
Fire    insurance    a    basis    of    commercial 
relations,  208 
a  factor  in  business  confidence,  208 
a  factor   in  maintenance   of  solvency, 

209 
agents'    commissions   and    poor    risks, 

15.  16,  17 
a  stimulus  to  enterprise,  208 
beginnings     of     modern     stock     com- 
panies, 8 
beginnings   of  state   departments  gov- 
erning, 213 
broad  averages,  necessity  for,  201 
competitive     warfare     of     early     com- 
panies,  9 
conflagration  hazard,  209 
conflicting  state  regulation,  218 
Dean's  jKnalytical  Schedule,  204 
dividends,  a  period  of  high,  37 
early,  in  middle  west,  240 
effect   San   Francisco  fire  would  have 

had  on  state  insurance,   200 
equitable   business   methods,    204 
evils   of   early   competition,    16 
evolution  of  legislative  supervision  of, 

212—213 
fair  rates,  201 
first  American  company,  9 
Harlow    N.    Higginbotham    on    credit 

system  and,  207 
individual       losses       nationally       dis- 
tributed,  218 
in  its  relation  to  business,  206-211 
in  relation  to  policy-holder,   197-205 
in  relation  to  the  state,  212-225 
L.  &  L.  schedule,  204 
legislation,   characteristics  of,   220 
legislative  mania  for  investigation  of, 

115  et  seq. 
losses  at  optimum,  34 
loss    payments    as    affecting    solvency, 

209 
magnitude  of  American,  in  force,  134 
Massachusetts'    early    legislation    con- 
cerning,   212—213 
minimizes  business  interruption,  209 
modern    conditions    result    of    evolu- 
tion,   216 
modern  doctrine  of,  78 
Moore's   Universal   Mercantile   Sched- 
ule, 203 
mutuality  of,  217    _ 
necessity  for  principle  of  private  con- 
tract in,   igS 
new  business  through  rebates,  258 
origin  of,  as  a  business,  7 
preventive    of    business    interruption, 

209 
principles  and  practise  of  state  super- 
vision compared,  214 
principle  of  basis  of  averages,    198 
rapid  increase  of  new  companies  after 

law   of    1849,   257 
rates  generally  equitable,  203 
Richards'      Experience      Grading     and 

Rating  Schedule,  204 
state  and  company,  compared,  199 
state  would  fail  in  emergency,  200 


15] 


INDEX 


Fire  losses  after  Civil  War,  4 

American   and    foreign   compared,    109 
and  building  values  compared,   1 10 
appalling    amount    of    in    forty-seven 

years,   loi 
averages,  the  basis  of,   198 
nation-wide    distribution    of,    218 
poor   construction   as   cause    of,    112 
rates    of,     between    cities    and    rural 

communities,    112 
statistics  of  American  and  European, 

164 
visualized  by  Charles  Whiting  Baker, 

Fire    prevention,   an   ignorant   audience, 

'75  .J  ,.       .  ■ 

an  insurance  president  who  ignored 
a  warning,   150 

early  efforts  in,  38 

efforts  to  secure  national  legislation 
on,   79 

evolution  of  idea  of,  133 

Fire   Commissioner   Adamson   on,    172 

fireman's  need  of  familiarity  with 
buildings  in  his  district,   173,    174 

growth   of,   78-83 

individual   responsibility  in,   174 

methods  of  committee  on,   144  et  seq. 

President   Oakley   on,   38,   39 

prophecy  of  National  Board  engineers 
in   Minneapolis,   148 

publications  of  Committee  on  Con- 
struction   of    Buildings,    152 

responsibility  of  individual  in  Europe, 

175 
results     of     committee     investigations 

on,   146 
results    of    investigations    of    National 

Board  Committee  on,   146 
standardization    of    hose    and    hydrant 

couplings,  necessity  of,  170 
systematization   of,   88 
to-day,  162-177 

work    of    National    Board    Committee 
on,  143 
Fire    Prevention    Bureau,    Boston's   sav- 
ing in   fire  losses  through,    173 
decrease  in  fires  in  New  York  through 

inspection   of.    172 
established    in    Cincinnati,    172 
established  in  New  York,   172 
"Fire-Prevention    Day"   established,    171 
Fire-protection    engineering    courses    in 

universities   and   schools,    1 1  i 
Firemen's  Insurance  Company,  of  South 
Carolina,    agency    commissions,    244 
Fires,   preventable,    142 
Florida     establishes     insurance     depart- 
ment, 271 
Franklin,  Benjamin,  director  first  Amer- 
ican  Company,   9 
Franklin    Fire    Insurance    Company    of 
Philadelphia     seeks     discussion     of 
state   exclusion,    241 
Friendly     Society,    organization    of,    in 
1684,  7 

Garrigue,   Rudolph,  attacks  rate  control,        Idaho  establishes  insurance  department, 
56,   58  274 

[316] 


General  agent,  objections  of  a,  32,  33 

Georgia  organizes  insurance  department, 
271 

German-American  Insurance  Company 
organizer  of  Factory  Insurance  As- 
sociation, 297 

Goods  insurance,  beginnings  of,  7 
introduced   by    Charles    Povey,    7 

Hall,  Henry  H.,  elected  president  Na- 
tional Board,  g2 

"Hamburg  form"  of  policy,  appearance 
of,   19 

Hammond,   Charles,  240 

Hand  in  Hand,  8 

Handy,  Daniel  N.,  librarian  Insurance 
Library  of  Boston,   161,  233  n. 

Hanover  Insurance  Company,  organizer 
of  Factory  Insurance  Association, 
297 

Hare,  J.  Montgomery,  elected  president 
National  Board,  113 

Harrison,  General,  ref.  240 

Harrison,   President,  ref.   79 

Hartford      Fire      Insurance      Company 
agents  in  Massachusetts,  245 
appoints  extra-state  agents,  237,  244 
appoints  out  of  town  agent,  236 

Hartford  and  New  York  rivalry,   14 

Hawaii,  valued  policy  laws  in,  278 

Heald,  Daniel  A,  chairman  of  first  com- 
mittee  on   Conference,   3,  4 
chairman    first    Executive    Committee, 

15 
"father  of  National  Board,"  Ji 
on    maintenance    of    obligatory    rates, 

58 
personality  of,  5 
predicts  wireless  telegraphy,  82 
presents  plan  to  first  convention,  11 
presidential    address.    69 
quoted,  22,  60 

retires  from  presidency,   77 
Hendee,  L.  G,  49 

proposes  15-per-cent.  commission  rule, 
64,  66 
Henry,    Alexander,    suggests    extending 

insurance  outside  state,  234 
Higginbotham,  Harlow  N.,  on  the  credit 

system   and   insurance,   207 
Home  Insurance  Company,  agency  force 

in   '50's.   242,  243,  245 
Hooker    and    Brewer,    appointed    Hart- 
ford agents,  237 
Hope,  George  T.,  62 

on  first  Committee  on  Conference,  3 
opposes  abandonment  of  rate  control, 

57 
personality  of,  5 
Howard     Insurance     Company,     agency 

commissions,   244 
Howard,    Mark,    chairman   first   conven- 
tion, 10 
quoted,  11 
Hydrant  and  fire  engine  tests,   144-146 


INDEX 


Illinois    creates    insurance    department, 
271 
Fire    Insurance    Commission    on    fair 

rates,  202 
investigates  insurance,  118 
Incendiarism  after  the  war,  4 
enormous  increase  of,   107 
Judge   D.   Ostrander  on,   140 
National  Board  Committee  on,  140 
Indiana      organizes     insurance      depart- 
ment, 268 
Insurance        Commissioners,        national 
convention  of,  a  corrective  of  hos- 
tile legislation,   223,  224 
Insurance   Company   of   North   America, 
233 
establishes     general     agency     system, 

235 
extends    insurance    outside    Pennsyl- 
vania, 234 
Insurance    Departments,    beginnings    ot 

state,  213 
Insurance  Chronicle,  quoted,  20 
Insurance   Expositor,    ^tna   agents'   re- 
view, 242 
Insuratice  legislation,  early  attempts  to 
exclude    foreign    business    in    Penn- 
sylvania, 235 
Maryland   opposes    foreign   insurance, 

236 
motives  frequently  inspiring,  139,  221, 

222 
New  York  prohibits  foreign  business, 

237  , 
New  \  ork  taxes  agents  lo  per  cent,  of 

receipts   of  premiums,   238 
Pennsylvania    excludes    foreign    com- 
panies, 236,  241 
South  Carolina  excludes  foreign  busi- 
ness, 236 
International    Association    of    Fire  _  En- 
gineers  approves   work   of   National 
Board,  151 
Iowa  insurance  supervised  by  auditor  of 

state,  270 
Irvin,  President  E.  C,  85,  92 

Jalonick's  Rating  Bureau,  Texas,  296 

Kansas  creates  insurance  depax-tment, 
271 

Kellogg,  Henry.  49 

Kentucky     organizes    insurance    depart- 
ment, 271 
rate-control  recommended  by  commis- 
sion, 130 

Kentucky  and  Tennessee  League  of  Fire 
Underwriters,  64 

Keystone  Insurance  Company,  of  Penn- 
sylvania,  agency  commissions,   244 

Kingsbury,  Ephraim,  appointed  Hart- 
ford agent,  237 

Kremer,  William  N.,  elected  president 
National  Board,  131 

Lamport,  Mr.,  criticizes  Executive  Com- 
mittee, 53 

Legislation,  Insurance,  early  Massa- 
chusetts, 212,  213 


[3 


early  New  York  act  to  exclude  foreign 
companies,  235 

four   characteristics  of  state,   220-222 

great  increase  in   1915,   139 

increased  expenses  caused  by,  paid  by 
public,  217,  219 

infrequency  of  "strike"  bills,  139 

need      of      harmonious      constructive 
policy    in    insurance,   218 

voluntarily     unified,     desirability     of, 
.230 
Legislative  investigations,  115,  116 

complaints  by  the  insured,   123 

Illinois'    favorable   report,    118 

Kentucky     recommends     rate-control, 
130 

Missouri  learns  of  its  own  fire-waste, 
128 

Missouri's  recommendation  as  to  rate- 
control,  130 

New    York    committee    on    the    credit 
system,  206 

New  York's  inquiry  of  1910,  122 

New    York    opposes    state    regulation, 
123 

North  Carolina  recommends  rate  con- 
trol, 130 

Pennsylvania's  report,  126 

President  Babb  on.  117 

Wisconsin       demands       "Compulsory 
State   Insurance,"   127 
Lexington     Insurance     Company     estab- 
lishes agencies,  240 
Limitation   of   commission,   anecdote  of, 

65 
Liverpool    and    London    and    Globe    In- 
surance     Company,      organizer      of 
Factory   Insurance  Association,  297 
Lloyd's  Coffee  House,  London,  8 
Local    boards,   revival   of   after   Chicago 

fire,  30 
London,    Great    Fire   of,    origin    of   fire 

insurance,  7 
Loss  of  life  through  fires,  iii 
Louisiana    establishes   insurance   depart- 
ment, 274 


Maine     creates     insurance     department, 
270 
enacts  anti-compact  law,   291 
repeals  anti-compact  law,  291 
Mallalieu,  Wilbur  E.,   138 

made  Assistant  General  Agent,  108 
made  general  agent,   114 
general  manager,   159,  160 
Mansard  roofs,  war  upon,  39 
Maryland   forbids  foreign  business,  236 
organizes    insurance    department,    271 
Massachusetts    appoints   attorney   to   ac- 
cept service  for  foreign  companies, 
265 
beginning    of    departmental     supervi- 
sion, 267 
classifies    policies    as    "More    Hazard- 
ous" and  "Less  Hazardous,"  265 
codifies  insurance  laws,  266 
constitutes  Board   of  Insurance  Com- 
missioners, 265 

17] 


INDEX 


early  legislation  concerning  insurance, 

213 
early    requirements    of.    from    foreign 

companies,   262 
Legislative  Committee  reports  against 

brokerage,  259 
limited    writing-capacity    of    insurance 

companies,  213,  262 
permits  railroad  investments,  264 
required    accounting    from    insurance 

companies,  212,  261 
requires  quarterly  statements,   264 
requires   ten-day   notice   of   incorpora- 
tion, 264 
taxes   out-of-state  companies,  262 
Meek.    Charles    E.,    helps    N.    F.    P.    A. 

publicity  campaign,  169 
Merchants'      Insurance      Company,      of 

Pennsylvania,    agency    commissions, 

244 

Merchants'  Insurance  Company,  of 
Rhode  Island,  agency  commissions, 
244 

Merrill.  W.  H.,  182.  183,  192,  193 
organizes       Underwriters'       Electrical 
Bureau,  195 

Members  of  National  Board,  roll  of, 
304-307 

McLean.  James  M.,  first  president  Iva- 
tional  Board,  14 

Michigan     organizes    insurance    depart- 
ment, 271 
passes  "Anti-Compact"  law,  76 

Miller,  Henry  K.,  61,  67 
death  of,   113 

Mineoia,  L.  I.,  a  fire  prophecy  with 
quick   fulfilment,    173 

Minnesota  and  North   Dakota  Fire  Un- 
derwriters   Association,    64 
organizes        insurance        department, 

Minnesota    orgamzes    insurance    depart- 
ment,  271 
Missouri    establishes    insurance    depart- 
ment, 270 
enacts  anti-cornpact  laws,  293 
fines  companies  under   anti-trust  law, 

.    ^95.  ^       . 

investigates  fire  insurance,   128 
Mississippi    organizes   insurance    depart- 
ment, 268 
Model    Building    Code,    National    Board 

Committee's,    151 
Monarch  Fire  and  Life  Assurance  Com- 
pany,   of    London,   agency    Commis- 
sions, 244 
Monarch  Fire  Office  of  London,  Agency 

system  in  1856,  242 
Montgomery,  Thomas  H.,  52 
death  of,   113 
first    general    agent    National    Board, 

31 
resigns   as    general    agent,    61 
sketch  of,  31 
Montana    establishes    insurance    depart- 
ment,  273 
Moore,   F.    C. .   compiles  Universal  Mer- 
cantile Schedule,  203 
"Moral  hazard"  in  insurance,  141 


[318] 


Nashville  Insurance  Company  estab- 
lishes agencies,  240 

National  Association  of  Credit  Men, 
joins  N,  F.  P.  A.  campaign  of  pub- 
licity,  169 

on  lire  prevention,  iii 
National   Association   of   Local   Fire   In- 
surance Agents,  organized,  247 

work  of,  247,  248 
National    IJoard    of    Fire    Underwriters, 

achievements  of  first  decade,  51 
National   Board  a  civilizing  force,  226— 
231 

Actuarial     Bureau's     classified    statis- 
tics, 157 

Acturial  Bureau  Committee,  work  of, 
154 

Actuarial  Bureau  established,   158 

Actuarial    Bureau's    card    index    sys- 
tem,  155 

Adjustments,   Committee  on,   153 

an    autocratic    monopoly    in    its    early 
years,  227 

building  code,  109 

causes  of  previous  failure,  71 

Clauses  andForms,  Committee  on,  153 

considers    problems    of    its    most    dis- 
astrous year,   104-114 

Constitution  and  By-laws,  308—311 

Construction    of    Buildings,    work    of 
Committee  on,   131 

darkest  hours  of,  68 

declining    fortunes   of,   60 

decries  discrimination  against  foreign 
companies,  85 

defended   by   Insurance   Chronicle,   20 

demands    improvements    in    Chicago's 
fire  hazards,  45 

dominating  influence  of,  36 

downfall  of,  through  abuse  of  power, 
227 

efforts    to    establish   uniform    rates   of 
commissions,  67 

emergency  meeting  of  Executive  Com- 
mittee  following   Chicago  fire,   34 

establishes    an    office    and    appoints    a 
secretary,  21 

Executive     Committee     advises     with- 
drawal from  Chicago,  45 

Executive      Committee,      arbitrariness 
of,  53  et  seq. 

Executive    Committee,    duties   of,    135 

Executive    Committee   increases   mem- 
bership, y:i 

Fire   Prevention,   duties  and  work  of 
Committee   on,    143 

first  annual  meeting,  18 

first  offices  of,   14 

first    period    of   demoralization,    24   et 
seq. 

fixing  ideal  standards,  229 

General         Manager's         multifarious 
duties,   159,  160 

growth  and  function  of,    134 

Incendiarism    and    Arson,    Committee 
on,  140 

inception  of.  3 

Laws,    Committee   on,   duties    of,    130 


INDEX 


Lighting,    Heating,  _  and    Engineering 

Standards,  Committee  on,   153 
magnitude    of    business   of    companies 

of,   134 
New    England    Provisional   Committee 

report,  49 
new  "Statement  of  Purposes,"  93 
officers  since  organization,  300-301 
organizes  law-office,   138 
period  of  greatest  decline,  60-69 
president's  address  after  Chicago  fire, 

30 
prints     standards     of     National     Fire 

Protection  Association,  88 
rate-control   relinquished,   T2 
rate  cutting,  recurrence  of,  25 
regeneration  of,  228 
reorganization  after  Chicago  fire,  31 
Retrenchment,      Committee      on,      ap- 
pointed, 54 
return  of  prosperity,  70 
review  and   survey,  70 
review  of  1907  meeting,  105 
roll    of    members    in    191 5,    304-307 
second  period  of  demoralization,  48  et 

seq. 
self-interest  and  public  service,  228 
standardization  of  rates,  24 
Statistics   and    Origin   of   Fires,   Com- 
mittee on,  work  of,   141 
"Statement   of   Purposes"  of,    13,  93 
striking       fulfilment       of       engineers' 

prophecies,  98,  99,  148,  149 
substitute  moral  suasion  for  coercion, 

85 
unenforced   resolutions,   66 
verdict    of    New    York    Investigating 

Committee   on,   230 
withdraws  from  Chicago,  46 
National    Conservation   Commission,    no 
National     Fire     Protection    Association, 
162 
formulates  engineering  standards,  88, 

166 
inception  of  the  idea,    165 
issues  press-bulletins  on  its  standards, 

168 
organization  of,   166 
Nebraska    enacts    anti-compact   law,   290 
organizes    insurance    department,    272 
passes   "anti-compact"  law,   -jy 
New   England   Insurance   Exchange,  64, 

247 
New  England  Provisional  Committee,  48 
New  England  United  Bureau  of  Inspec- 
tion  established,   74 
New     Hampshire     enacts     anti-compact 
law,    77,   291 
organizes  insurance  department,  267 
withdrawal  of  stock  and  mutual  com- 
panies from,  77 
New    Hampshire   Fire   improves   factory 

risks,  74 
New     Jersey     organizes     insurance     de- 
partment, 272 
New    Mexico    organizes    insurance    de- 
partment, 273 
Nevada     establishes     insurance     depart- 
ment, 269 


[319] 


New  York  State,  early  attempt  of  legis- 
lature to  exclude  foreign  business, 
235     .„ 

early  difficulties  of  securing  charters, 
256 

Insurance     Investigating     Committee, 
on  the  credit  system,  206 

legislative   investigation   of   fire   insur- 
ance,   122 

levies  10  per  cent,  tax  on  agents'  pre- 
miums,   238 

organizes   insurance   department,   269 

prohibits   foreign    insurance,    237 
New  York  Board  of  Insurance  Brokers, 
by-laws  of,  254 

organized,  254 
New    York    Board    of    Fire    Insurance 
Companies,    committee    recommends 
payment  of  brokerage,  255 

committee   report  on    Board  of  Brok- 
ers, 255 

committee's   preliminary   circular,    6 

convention  called  by,  7 

grants   commissions   of   5%  and    10%, 
252 

organized,  252 
New    York    City   and   Hartford    rivalry, 
14 

an  incident  of  Windsor  Hotel  fire,  176 

decrease   in   fires  through   department 
inspections,   172 

fire  of   1835,    10 

Fire    Prevention    Bureau    established 
in,   172 

water-famine  of  1891,   loi 
New   York   City   Tariff  Association,   de- 
moralized   through    rate-cutting,    84 
New    York    Fire    Insurance    Exchange, 

formation  of,  84 
Niagara    Insurance    Company    organizer 
of    Factory    Insurance    Association, 

North  Carohna  recommends  rate-con- 
trol, 130 

North  E)akota  organizes  insurance  de- 
partment, 273 

Norton,  Ebenezer  F.,  first  Hartford 
agent  outside  state,  237 


Oakley,   Henry  A.,    <^2 

investigates    Chicago    fire    department, 

41-43 
quoted,  37,  66 

Officers  of  National  Board  since  its  or- 
ganization,  300,    301 

Ohio     organizes     insurance     department, 
270 
passes  "anti-compact"  law,   76 

O'Keefe,  Fire-Prevention  Commissinner 
of  Boston,    172 

Oklahoma  establishes  insurance  depart- 
ment, 2-74 

Old  Orchard  Beach  destroyed  through 
lack  of  standardized  hydrant  coup- 
lings, 171 

Old  Colony  Insurance  Company,  agency 
commissions,   244 

Olmstead,  Frederick  E^w,  quoted,  28 


INDEX 


Ostrander,  Judge  D.,  on  organized  in- 
cendiarism,  140 

Pacific  Insurance  Union,  64 

Panama-Pacific  Exposition  fire  system 
designed  by  National  Board  en- 
gineer, 147 

Parish,  J.  S.,  49 

first  treasurer  National  Board,  14 

Paul,  Colonel   Samuel  B.,  23 

Pennsylvania    establishes    insurance    de- 
partment,  272 
excludes    all    outside    companies    from 

state,  236,  241 
introduces   bill   to   exclude   foreign  in- 
surance,   23s 
Legislative       Committee       disapproves 

"state  insurance,"   126 
legislature  investigates  fire   insurance, 
126 

Phenix    of    Brooklyn    improves    factory 
risks,  74 
organizer    of    Factory    Insurance    As- 
sociation, 297 

Philadelphia  Board  of  Underwriters 
organized,  286 

Phillip,  Governor,  message  on  state  in- 
surance to  Wisconsin  legislature, 
127 

Phoenix  Fire  Office  of  London,  233 
early   opposition  to,   236,   237 

Phoenix  Insurance  Company,  of  Hart- 
ford, organizer  of  Factory  Insur- 
ance  Association,    297 

Policy-holder,  fire  insurance  in  relation 
to,   197-205 

Portland  fire  of   1865,  7 

Post,  William  H.,  first  salaried  clerk,  22 
quoted.   27,   28 

Povey,  Charles,  introduces  goods  in- 
surance, 7 

Pragmatic  policy-holders,    199 

Press,  the  lay,  on  duties  of  underwrit- 
ers.  133 

Protection    Fire    Insurance    Company   of 
Hartford     appoints     first     agent     in 
middle  west,  238 
first  to  develop  agency  system,  238 

Providence-Washington  Insurance  Com- 
pany organizer  of  Factory  Insur- 
ance Association,  297 

Queen  Company  improves  factory  risks, 

organizer  of  Factory  Insurance  Asso- 
ciation, 297 

Rankin,  James  M.,  investigates  Chicago 

fire  department,   41-43 
Rate-control,   necessity   for,   23 
Rate  demoralization  in  1870,  27 
Rate-cutting,  early.  5,  9,   lo,   16 
E.  W.  Crowell  on,  25 
in  New  England,  48 
Rates,  control  by  state  recommended  in 
Missouri,  130 
diminishing    profits    through    cutting, 
28s 


[320] 


establishment     of     regional     organiza- 
tions to  sustain  rates,   288 
fair,  difficulty  of  ascertaining,  202 
fair,  the  point  of  view  as  to.  201 
mid-century  efforts  to  stabilize,   288 
North      Carolina      committee      recom- 
mended state  control  of,   130 
Pennsylvania    Legislature    Committee 

approves  bureau   of,    126 
raised  after  Chicago  fire,  35 
regulation    by    state    disapproved    by 
New     York     legislative     committee, 
123 
state    control    of,    approved    by    Ken- 
tucky  Legislative   Committee,    130 
Rating  Bureau,  organization  of,  24 
Rhode    Island   establishes   insurance   de- 
partment. 268 
Richards,  Ellis  G.,  132 

elected    president   of   National   Board, 

originates     Experience     Grading     and 

Rating  Schedule,  204 
suggests    gathering   national    statistical 

data,  158 
Robbins.  Ephraim,  first  agent  in  middle 

west,   238 
sketch  of,  239 
Robbins,  W.  B.,  sketch  of,  240 
Rochester,  rates  abated  in,  through  new 

water  supply,  46 
Rough  Notes  quoted,  278 
Royal      Insurance     Company     organizer 

of    Factory    Insurance    Association, 

297 
Ryon,   Oscar   B.,   given   charge  of  joint 

law-office  of  (Western)  Union,  137, 

138 


Salamander     Society,     The.     formulates 
rates.   249 
founded,  249 
membership  of,  249 
Salem,    Massachusetts,    conflagration    in, 
149 
cause  of,  180 
San  Francisco  conflagration.  98 

effect  of,  on  insurance  companies,  100, 
:oi  _ 

Schedule-rating  as  an  improver  of  haz- 
ards, 41,  46 
Shaler.   General,  appointed  as  Chicago's 

fire  chief,  46 
Sheldon,    George    P.,    elected    presicjent 
National  Board,  92 
first   president   Factory   Insurance  As- 
sociation,  297 
Skilton,  D.  W.   C.,  elected  president  of 
National  Board,   77 
favors      abandoning      rate-making      to 

local  boards,  54 
quoted,  78 
Smith,    Dwight   R.,   49 
Smith,  John  W.,  made  inspector  of  Fire 
Departments     for     National     Board, 

73 
Smith,   J.   Milton,  motion  by.   the   start- 
ing point  of  the  organization,  3 


1 


INDEX 


Snow,  Elbridge  G.,  made  honorary  life 
member     of     Executive     Committee, 
136 
South     Carolina     excludes     foreign     in- 
surance, 236 
Insurance  Company         establishes 

agencies,   240 
organizes    insurance    department,    272 
South   Dakota   establishes   insurance  de- 
partment,  274 
Southeastern  Tariff  Association,  64 
Springfield    Fire   and    Marine    Insurance 
Company,    agency    system    in    1856, 
243;    commissions,   244 
Sprinklers,    automatic,    introduced,    166 
Standardized    hydrant    couplings,    exam- 
ples of  importance  of,   170 
Star    Insurance    Company,    of    Ogdens- 
burg,  agency  force  in  '50's,  242,  243 
State  and  company  insurance  compared, 

199 
State   fire   insurance  in   relation  to  the, 
212-225 
legislation,   need   of   harmonious   con- 
structive policy  of,  218 
legislation,   when  superfluous,  215 
modern    insurance   conditions   not   due 
to   regulation,    216 
State  insurance  a  suppositious  case,  200 
a   violation    of   a    fundamental    princi- 
ple,   198 
disapproved    by    Pennsylvania's    com- 
mittee,  126 
State  Insurance  Commissioners*  Conven- 
tion opposes  valued  policy,  279 
State  regulation  a  cause  of  inefficiency, 
219 
four  characteristics  of,  220 
heterogeneity  of,  222 
ignorance  of,  220 
incessancy  of,  222 
increased     cost     to     public     through, 

219 
insurance   harassed  by  conflicting,   218 
unfriendliness  of,   221 
State  Auxiliary  Boards,  organization  of, 

State  supervision, _  261-274 

Alabama  organizes  insurance  depart- 
ment, 269 

Alaska  organizes  insurance  depart- 
ment,  274 

Arizona  organizes  insurance  depart- 
ment, 273 

Arkansas  organizes  insurance  depart- 
ment, 272 

California  organizes  insurance  depart- 
ment,  270 

Connecticut  organizes  insurance  de- 
partment, 270_ 

Colorado  organizes  insurance  depart- 
ment, 273 

Delaware  establishes  insurance  depart- 
ment, 2Ti 

District  of  Columbia  organizes  insur- 
ance department,  274 

earl^  charters,  261 

Florida  establishes  insurance  depart- 
ment, 271 


[321] 


foreign  companies  in  Massachusetts, 
262  _ 

Georgia     organizes    insurance     depart- 
ment, 271 
Idaho     establishes     insurance     depart- 
ment, 274 

Illinois  creates  insurance  department, 
271 

Indiana  organizes  insurance  depart- 
ment,  268 

in  Iowa  by  state  auditor.  270 

Kansas  creates  insurance  department, 
271 

Kentucky  establishes  insurance  de- 
partment,  271 

Louisiana  organizes  insurance  depart- 
ment,   274 

Maine  establishes  insurance  depart- 
ment, 270 

Maryland  organizes  insurance  depart- 
ment, 271 

Massachusetts  appoints  attorney  to  ac- 
cept service  for  foreign  companies, 
26s  _ 

beginning  of  departmental  supervi- 
sion, 267 

classifies  policies  as  "more  hazardous" 
and  "less  hazardous,"  265 

Massachusetts  codifies  insurance  laws, 
266 

constitutes  Board  of  Insurance  Com- 
missioners, 265 

first  official   insurance  report,   266 

limits  writing  capacity,  262 

makes  insurance  liable  to  taxation, 
262 

permits    railroad    investments,    264 

requires  ten-day  notice  of  incorpora- 
tion,  264 

Michigan  establishes  insurance  de- 
partment,  271 

Minnesota  organizes  insurance  de- 
partment,  271 

Mississippi  organizes  insurance  de- 
partment,  268 

Missouri  establishes  insurance  depart- 
ment,   270 

Montana  establishes  insurance  depart- 
ment, 273 

Nebraska  organizes  insurance  depart- 
ment,  2^2 

Nevada  establishes  insurance  depart- 
ment, 269 

New  Hampshire  organizes  insurance 
department,  267 

New  Jersey  organizes  insurance  de- 
partment, 272 

New  Mexico  organizes  insurance  de- 
partment, 273 

New  York  organizes  insurance  de- 
partment, 269 

North  Dakota  organizes  insurance  de- 
partment, 273 

Ohio  organizes  insurance  department, 
270 

Oklahoma  organizes  insurance  depart- 
ment,  274 

Pennsylvania  establishes  insurance 
department,   2T2 


INDEX 


principles  and  practises  compared, 
214 

Rhode  Island  establishes  insurance 
department,  26S 

South  Carolina  organizes  insurance 
department,  2-j2 

South  Dakota  organizes  insurance  de- 
partment,   274 

Tennessee  establishes  insurance  de- 
partment, 272 

Texas  organizes  insurance  department, 
272 

Utah  organizes  insurance  department, 

\  ermont  insurance  department  or- 
ganized, 267 

Washington  organizes  insurance  de- 
partment, 274 

West  Virginia  organizes  insurance  de- 
partment, 269 

Wisconsin  organizes  insurance  de- 
partment,   270 

Wyoming     establishes     insurance     de- 
partment, 272 
Steam    fire    engines,    growth   of   use    of, 
47 

"Three-fourths  form"  of  policy,  appear- 
ance of,   19 

Tennessee      creates      insurance     depart- 
ment,  272 

Tennessee  Fire  and  Marine  Ins.  Co.  es- 
tablishes agencies,  240 

Texas    applies   anti-trust   laws   to    insur- 
ance. 296 
enacts  anti-compact  law.  290 
organizes   insurance   department,   272 
passes  "anti-compact"  law,  77 

Toronto  fire  of  1904,  96 

Trumbull,    Jonathan    G.    W.,   236 

Tuckett's    Monthly    Insurance    Journal, 
quoted,   287 

Underwriter,  the  original,  7 
Underwriters  Press,  The,  on  duties  of, 

'33     . 
"Underwriters     Alliance,"     organization 

of,  61 
Underwriters    Association    of    the    State 

of  New  York,  64,  247 
Underwriters'     Electrical     Bureau,     es- 
tablished by  W.   H.   Merrill,    195 
Underwriters   International   Electric   As- 
sociation,   formation    of,    81 
Underwriters'   Laboratories,    178-196 
a  dishonest  manufacturer  trapped,  193 
a   generator  that   failed,    186 
cooperation    of     manufacturers    with, 
,   192,   194 
demerit     system     for     manufacturers, 

194 
dishonest  manufacturers  exposed,   193 
fire-door  and  window  test,   180 
fire-proof  construction  of  building  of, 

181 
hydraulic  testing,   190 
label     goods,     advantages     in     selling 

value  of,   191,  192 
organized,  92 


[322] 


outgrowth  of  Underwriters'  Electrical 

Bureau,    195 
preventing    creation    of    hazards,    the 

goal  of,   178 
purposes  and  work  of,   182 
scientific    testing    machinery    of,    183- 

191 
spectacular    "fire-proof"    roofing    test, 

187 
steel  column  test,   189 
testing    electric    wire    insulation,    184 
testing   fire-hose,    183 
testing  matches,   185 
testing   stove-pipe  thimble,   188 
Underwriters  Social  Club  of  St.  Joseph, 
Mo.,   dissolved    by    Supreme    Court, 
294 
"Underwriting,"  origin  of  the  term,  8 
Uniform  rates  of  premium,  control  aban- 
doned   finally    by    National    Board, 
92 
United    Fire   Underwriters   of  America, 
organized,  62 
terminates   its    existence,    63 
United     States  _  Geological     Survey    on 
fire   losses  in    1907,    112 
on  national  fire  losses,   163 
quotes     warning     of     Committee     of 
Twenty,    99 
United       States       Insurance       Gazette, 

quoted,  253 
Universal  Mercantile  Schedule,  Moore's, 

203 
Utah    organizes    insurance    department, 
273 

Valliant,    Judge,    dissenting    opinion    of, 
on    Underwriters    Social    Club,    294 
Valued  policy  a   cause  of  incendiarism, 
75 

advent  of,  47 

arguments  of  opponents  of,  281 

as  a  source  of  incendiarism,  279,  280 

a   source  of  evils  it   was  designed  to 
prevent,   277 

claims  of  its  advocates,  281 

definition   of   policy,   275 

denounced    by    Wisconsin    Legislative 
Committee,   127 

disapproved     by     Australian     Govern- 
ment,  282 

objections  to,  275 

opposed  by  various  state  commission- 
ers, 280 

increased   legislation   favoring,   74 

states  in  which  now  in  force,  278 

Wisconsin   repeals  law,   76,   277 
Valued    policy   legislation,   275—282 

condemned     by     New    York's    investi- 
gating  committee,    123 
Vermont     organizes    insurance     depart- 
ment, 267 
Virginia    establishes    insurance    depart- 
ment, 270 

Walton,  E.  A.,  elected  president  Na- 
tional Board,  83 

Walford,  Cornelius,  on  valued  policy, 
276 


INDEX 


Washburn,    John    H.,    elected    president 
National  Board,  113 

Washington      organizes     insurance     de- 
partment, 274 

Water-supply    tests    by    National    Board 
Committee,   144 

Wentworth,  Franklin  H.,  seeks  publicity 
for  N.  F.  P.  A.  standards,   168 

Western   Factory   Insurance  Association 
organized,  74 

(Western)    Union   establishes  joint  law- 
office,   137 
merges  its  law-office  into  work  of  Na- 
tional Board,   138 
organized,   63 

West    Virginia    organizes   insurance   de- 
partment, 269 

Weston   Insurance  Company,   of  Massa- 
chusetts,  agency   commissions,   244 

Whelan,  Israel,  first  American  agent  of 
Phoenix  Fire  Office,  sketch  of,  233 


Whelan,    Israel,    2nd,    advertises    insur- 
ance agency,  234 
founds    American    Fire    Company    of 

Philadelphia,    236 
manages  first  agency  office  in  America, 
.233 
Whiting,  Charles  B.,  death  of,  113 

first  salaried   secretary,   22 
"Wild-cat"  insurance  after  Chicago  fire, 
33 
early,   16 
Wisconsin  assumes  fire  risk  on  its  State 
buildings,    127 
legislature       investigates       insurance, 

organizes   insurance   department,   270 
passes  first  valued  policy  law,  275 
repeals   "Valued    Policy"   law,    76 
"Wisconsin  Law,"  advent  of,  48 
Wyoming    organizes    insurance    depart- 
ment,  2T2 


[323] 


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